This article first appeared in TaxVine, a member’s newsletter from The Tax Institute.
Key points
- The NSW Court of Appeal ruled in favor of the Chief Commissioner, confirming that payments made by Uber to its drivers are subject to payroll tax.
- This judgment has significant implications for business models in the gig economy and other industries where intermediaries act as collection agents on behalf of service providers.
- Uber would need to seek special leave to appeal to the High Court of Australia by 29 August 2025 to challenge this decision.
On 1 August 2025, a five judge panel of the NSW Court of Appeal (the Court) delivered a unanimous judgment in Chief Commissioner of State Revenue v Uber Australia Pty Ltd [2025] NSWCA 172 (the Appeal).
The Appeal was decided in favour of the Chief Commissioner, reversing the first instance decision by the NSW Supreme Court in Uber Australia Pty Ltd v Chief Commissioner of State Revenue [2024] NSWSC 1124 (the primary decision), confirming that payments made by Uber to its drivers were subject to payroll tax.
This judgment has major implications for business models across the gig economy and other industries where intermediaries act as collection agents on behalf of service providers. Given the contractor provisions are harmonised across all States and Territories (except Western Australia), the decision is likely to have a substantial and immediate impact on the regulation of payroll tax and compliance practices throughout Australia.
To challenge this decision, Uber would need to seek special leave to appeal to the High Court of Australia by 29 August 2025.
Background
In the primary decision, handed down on 6 September 2024, Uber successfully challenged six payroll tax assessments totalling approximately $81.5 million issued by Revenue NSW for the 2014–15 to 2019–20 financial years.
In the first instance, his Honour, Hammerschlag CJ, concluded that:
- Uber’s contracts with the drivers were ‘relevant contracts’ under section 32 of the Payroll Tax Act 2007 (NSW) (the Act) as services were supplied by the drivers to Uber under those contracts;
- several statutory exclusions (e.g. ancillary services, 90day rule, services to public generally) were considered but largely did not apply; and
- crucially, payments from Uber to the drivers were not made ‘for or in relation to the performance of work’ as required under section 35(1) of the Act. Uber was merely acting as a payment collection agent, passing rider payments to the drivers on a net of service fees basis, rather than remunerating the drivers for their work.
As a result, the assessments and premium interest were revoked. The Chief Commissioner appealed this decision to the NSW Court of Appeal.
Court of Appeal decision
On appeal, the Court was tasked with answering a number of key issues, which have been summarised below.
- Was driving a service (among others) supplied by the drivers to Uber and therefore, was Uber deemed an employer of its drivers under the Act?
Answer: Yes
- Could Uber rely on an exemption applicable when services supplied by the drivers were ancillary to the use of goods (in this case, ‘goods’ being the drivers’ cars)?
Answer: No
- Were the payments from Uber to drivers deemed ‘wages’ as these payments were made ‘for or in relation to the performance of work’?
Answer: Yes
- Could Uber’s role as a payment intermediary remove the payroll tax liability?
Answer: No
Court of Appeal’s findings
The Court made a number of key findings which may have ramifications for other businesses using a similar model:
- Substance over form approach adopted — despite Uber’s contractual structuring and its role as a payment facilitator, the Court found the drivers were performing a service for Uber, being the transportation of riders. This was held to be a service to Uber because Uber derived revenue from ridesharing, and it was the foundation of Uber’s business.
- Relevant contracts — for payroll tax purposes, contracts are not considered ‘relevant contracts’ if services related to the performance of work are ancillary to the supply of goods.
The Court held that the drivers’ services fell within the scope of ‘relevant contracts’ under section 32 of the Act and the exclusion under paragraph 21(2)(a) of the Act for ancillary services to the use of the car did not apply.
The Court rejected Uber’s argument that the service of driving is ancillary to the use of the car. The Court also did not accept Uber’s reliance on the legislative history to suggest the provision of equipment, such as a car, signals an independent business operation.
The Court agreed with the primary judge that the driving service is not separate from, but inseparable from, the use of the vehicle. The driver’s provision of transportation necessarily involved the use of their own car. The driving service and the use of the car were so extricable linked it could not be said that one was ancillary to the other.
- Payments were ‘taxable wages’ — the Court held that payments to the drivers, even if passed through from riders, were ‘for or in relation to the performance of work’ for Uber and therefore subject to payroll tax.
In the primary decision, Hammerschlag CJ’s conclusion that Uber merely disbursed rider payments as a collection agent was overturned as being too narrow a construction.
The phrase ‘for or in relation to the performance of work’ requires only a relevant connection between the payment and the work. The payments made by Uber to the drivers were ‘in relation to’ the drivers’ work of transporting riders:
payments were calculated based on the work (trip duration, distance, time); and Uber retained a percentage-based service fee, showing the payment structure is work-contingent.
Uber’s obligation to account to the drivers for rider payments does not exclude a connection with work performance.
The broader statutory purpose of the relevant contract provisions capturing gig economy models must prevail over platform-based payment mechanics.
- Business structure and payroll tax — the decision demonstrates that payroll tax may apply regardless of the business model, so long as there is:
a relevant contract;
performance of work; and
a payment referable to that work.
- Outcome – Uber is liable for payroll tax on the net amounts remitted to the drivers, potentially amounting to around $80 million, plus interest.
Implications
This is a nationally significant case and the outcome will influence:
- the payroll tax treatment of gig economy platforms, such as rideshare and delivery services, where platforms collect payments on behalf of service providers; and
- similar arrangements in other sectors, such as medical centres, mortgage brokers, financial planners, where a collection agent collects payments on behalf of service providers.
Next steps for businesses
Businesses should review their arrangements involving contractors paid via platforms or agents and assess their payroll tax liabilities under the relevant contractor provisions. It is important that businesses consider their current record keeping procedures to ensure that documentation is retained to support the application of available contractor exclusions.
Broader enforcement and audit activities by State and Territory Revenue offices may follow the Uber decision, including retrospective assessments of payroll tax.
Closing comments
This decision is a significant development in payroll tax law, particularly in the context of the evolving gig economy. It sets a precedent for how such arrangements may be treated under current legislation.
