Sandy McDonald was born on Inverway Station, in the Northern Territory. His father was European and had a station called Kirkimby; his mother was Aboriginal and belonged to two groups, Djaru and Nyining. His mother was promised to his father in the traditional custom. McDonald's father sold the station to Vestey when McDonald was fourteen; they bought horses to breed in the Hall's Creek area of Western Australia but the horses died in the drought and McDonald's father died soon after. Although he never went to school, McDonald was taught to read by his father. McDonald became a stockman and went prospecting in the desert for three years before returning to station work and droving.