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An Australian syndicate that won a rec-ord $27 million jackpot in the Virginia Lottery contends the winnings should be tax-free under terms of a 1982 treaty between the United States and Australia.

The state Lottery Department ordinarily withholds 4 percent of lotto winnings for Virginia taxes and 30 percent for federal taxes.That's what it also intends to do in the case of the lotto drawing won by the International Lotto Fund, unless advised otherwise by the state Department of Taxation or the Internal Revenue Service.

Questions about the identity of the syndicate were satisfied by the Australian Securities Commission, Virginia officials said Friday, clearing the way for the state to pay the first of 20 annual checks.

However, the tax question remains.

The Australian group cited the 1982 treaty, called "The Convention between Australia and the United States of America for the Avoidance of Double Taxation."