$42m Powerball: Bank it and live on interest alone

Do you think you would be able to live off a yearly income of $844,000?

That would be the amount of cash you could have sitting in your bank account from interest after-tax alone if you won Powerball's $42 million jackpot.

Powerball jetted to its second-largest ever jackpot in Lotto NZ history on Saturday after the $35m prize went unclaimed.

Now the prize sits at an eye-watering $42m for Wednesday night's draw.

If you were lucky enough to win, you would not even be forced to pay tax on your prize - only on any interest, you earn if you invested the prize.

But only if you, the winner, were a New Zealand tax resident, KPMG partner in tax Peter Scott told the New Zealand Herald.

"That's a good thing about being in New Zealand, which is different to overseas jurisdictions which do tax those sorts of things," he said.

"Obviously, you'll be taxed if you go and invest that based on the interest or investment earnings but not on the initial pay-out."

If you put the $42m in the bank with three per cent interest, you could earn a whopping $1,260,000 in interest each year.

The tax would not even take out a large bite of your earnings, assuming the cash was being earned directly and not through a company.

Of the $1.26m, around $416,000 would be lost in tax, leaving you with about $844,000 in your bank account.

With a bank, they would do the withholding tax for you and it would be withheld before the bank paid out the interest, Scott said.

But the $844,000 would be worth celebrating and would be more than ample to live off while your millions earned thousands.

It's more than 10 times what a secondary school teacher with more than five years' experience might earn yearly (around $71,000 to $80,000).

And Prime Minister Jacinda Ardern's impressive salary of $470,000 would not even come close to yours either.

 

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