The showdown pitted amateur players and celebrities against an elite field of 24 professionals, which included the likes of Carlos Alcaraz, Jannik Sinner and Iga Swiatek.
Smith, who qualified as the New South Wales state champion, got the better of two-time Australian Open winner Sinner and women's world number four Amanda Anisimova, before beating Joanna Garland in the final.
Taiwan's Garland, the women's number 117, had reached the final after beating world number three Alexander Zverev, former Wimbledon finalist Nick Kyrgios and Maria Sakkari.
"I don't know anymore. Coming into tonight, I was just happy to win one point. I was so nervous, but I enjoyed being out here. It was a great experience," said Smith, who added he planned to buy a house with his winnings.
The event, part of the expanded opening week of the major, featured an elimination draw with 'rock, paper, scissors' used to determine who will serve or receive, and the winner of the point going through to the next round.
Amateurs were allowed two serves, but ATP or WTA-ranked players could only have one go.
Greece's Sakkari knocked out the men's world number one, Alcaraz, after he netted a dropshot.
"The dropshot is my shot, I don't know what happened," a nonplussed Alcaraz said.
Six-times Grand Slam champion Swiatek exited at the hands of Spaniard Pedro Martinez, who drew gasps from the crowd at the Rod Laver Arena when he caught world number 10 Alexander Bublik by surprise with an underhand serve.
"I gave him a taste of his own medicine," Martinez said of Bublik, who is known for his phenomenal touch and penchant for trick shots.
The Australian Open runs from January 18 to February 1 at Melbourne Park.