In Short
Running online competitions in Australia can trigger gambling laws if winners are chosen by chance. Most chance-based promotions are treated as lotteries unless they meet a legal exemption. Businesses must follow state and territory rules, including entry requirements, permit thresholds, and prize restrictions.
Tips for Businesses
Before launching a promotion, confirm whether it is chance-based or skill-based. Keep entry genuinely free and avoid charging for extra chances. Check permit thresholds in each state if the promotion runs nationally. Prepare clear terms and conditions, confirm prizes are allowed, and keep records to show the promotion genuinely supports your business.
Summary
This guide explains Australian lottery and trade promotion laws for businesses operating in Australia. It provides a plain-English overview of how online competitions are regulated and how businesses can structure promotions lawfully, prepared by LegalVision’s business lawyers, who specialise in advising clients on trade promotions and gambling law compliance.
Table of Contents
Australian businesses are increasingly running online competitions and giveaways to boost customer engagement and promote their products or services. However, many business owners do not realise that most promotional activities involving chance-based prize draws are actually classified as lotteries under Australian law. Running an unauthorised lottery can result in hefty penalties, including fines up to $100,000 and potential criminal charges, with penalties varying across different states and territories. Without proper legal compliance, what seems like a simple marketing promotion can quickly become a costly legal nightmare that threatens your business operations. This article will guide you through the legal requirements for running compliant online promotions, including trade promotion exemptions and art union regulations, to help you avoid these legal pitfalls.
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Understanding Lottery Laws in Australia
You cannot run a lottery in Australia without specific legal exemptions. A lottery involves participants entering a draw where winners are selected by chance rather than skill. Each state and territory has its own rules and regulations on lotteries. Unlawful lotteries can result in hefty fines plus potential criminal charges.
Exemptions of Lottery: Trade Promotion
One of the exceptions to unauthorised or illegal gambling includes trade promotion lotteries. A trade promotion is a free-entry competition conducted to promote goods or services supplied by a business. In order to be considered as an exempt trade promotion instead of an illegal lottery, it must meet these conditions:
- The purpose of the promotion must be to genuinely promote the goods or services of the business
The promotion must genuinely advertise goods or services the business typically sells. Creating artificial products just for lottery entry may violate this requirement. For example, a café promoting coffee through a free lunch giveaway satisfies this test, while a business creating “membership subscriptions” that offer no benefit to customers, except for a “chance to win” prize, solely to generate lottery entries, does not.
- The promotion is free to enter.
Free entry means participants cannot pay anything of intrinsic value (including entry tickets, rewards or loyalty points) to enter the promotion. However, businesses can require customers to purchase goods to enter the promotion. For example, a clothing business can offer a complimentary entry into the draw to customers who purchase clothes. However, if this clothing business charges its customers $10 for an additional entry into the draw, it would breach the regulation and constitute an illegal lottery.
Note that games of skill with specific judging criteria generally do not count as illegal lotteries. You can run these promotions without permits, even with large prize pools. Businesses must still maintain detailed records and ensure genuine compliance.
Permit Requirements
Permit requirements vary significantly across states. NSW requires authorities for prizes over $10,000; South Australia requires permits for prizes exceeding $5,000; and the ACT requires permits for prizes above $3,000. Victoria and Queensland generally do not require permits, while Western Australia issues automatic permits subject to compliance with terms and conditions.
Running nationwide online promotions means complying with each state’s rules and obtaining the necessary permits where required. You must provide clear terms and conditions, start and end dates, and unclaimed prize procedures when applying. Regulators may reject applications if the terms and structure of your trade promotion are unclear or non-compliant.
Prohibited Prizes
Each state and territory prohibits certain products as promotional prizes, including alcohol, tobacco, and medical procedures.
If you are planning to run an online trade promotion for your business, make sure to speak with your lawyers to ensure you are compliant with the trade promotion regulations.
Exemptions of Lottery: Art Union and Raffles
Art unions and raffles are paid-entry fundraising activities where participants buy tickets for random prize draws. These activities typically support charities, community organisations, or fundraising appeals. Unlike trade promotions, participants can pay to enter.
Who Can Conduct Art Unions and Raffles
Most states and territories require raffles and art unions to be conducted by registered charities and not-for-profit organisations. For example, in Victoria, you must already be a declared community or charitable organisation, or have applied to become one, before applying for a permit. On the other hand, New South Wales allows organisations to conduct art unions, provided the purpose is to raise funds for registered not-for-profit organisations and charities. If you are raising funds on behalf of a not-for-profit organisation or charity, you must have written authority from the relevant organisation and pay a minimum amount from your gross proceeds to them.
Written Authority
Written authority from charities or not-for-profit organisations must specify the fundraising scope, the distribution of proceeds, and the compliance conditions. Businesses that conduct raffles or fundraising on behalf of a charity or non-profit organisation must deposit funds within specified timeframes (5-7 days, depending on each state or territory) and maintain detailed fundraising records.
Permit Requirements
Permit and authority thresholds also differ between states and territories, depending on the prize pool. However, as some states or territories issue permits only to not-for-profit organisations or charities, a commercial business cannot conduct online art unions or raffles open to all states and territories of Australia.
You should speak to your lawyers to understand your art union permit requirements (if any) and how you can conduct art unions and raffles in your state or territory.
Key Takeaways
Running online competitions in Australia requires careful navigation of complex gambling laws that vary across states and territories. Trade promotion lotteries offer the safest exemption for businesses, but they must be genuinely free to enter, promote actual business products or services, and comply with state-specific permit requirements where prize values exceed certain thresholds. Art unions and raffles are primarily reserved for registered charities and not-for-profit organisations, making them unsuitable for most commercial businesses wanting to run nationwide campaigns. In some states, you may be able to conduct a raffle on behalf of charities and not-for-profit organisations as long as you have obtained a written authority from the relevant non-profit organisation.
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Continue reading this article below the formFrequently Asked Questions
A business can donate its profits to a charity as a corporate donation without additional compliance. However, if you advertise the charitable donation as part of your trade promotion (e.g., “$1 from every purchase goes to charity”), it triggers both charitable fundraising and trade promotion regulations. You will need written authority from a registered charity and formal agreements outlining the distribution of proceeds. There are additional regulatory requirements involved. Consult with legal professionals to navigate these intersecting regulations and mitigate compliance risks.
Yes, you can require a purchase for trade promotion lotteries, as long as the entry itself remains free. For example, “buy any coffee and receive a free entry” is compliant. However, charging extra fees for additional entries (like “$5 for bonus entries”) would make it an illegal lottery.
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