The New South Wales Supreme Court has that Uber is not liable for payroll tax on payments made to drivers in Uber Australia Pty Ltd v Chief Commissioner of State Revenue [2024] NSWSC 1124.

Background

Uber works through two apps – a Driver App and a Rider App – these operate as a platform to enable drivers and riders to connect.

A rider is charged a fare based in part as a function of time and distance plus tolls. Uber takes a service fee from the fare (typically 20-25%) and passes the rest onto the driver.

A rider is given the ability to be issued an invoice, which will show the driver and the driver’s ABN. A receipt is emailed to the rider under the Uber logo.

Legislation

Payroll tax typically applies to wages paid by employers to employees.

The provisions have been extended to cover payments made under “relevant contracts”. These were introduced to tax payments made to independent contractors in a similar way as if they are had been employees.

Paragraph 32(1)(b) of the Payroll Tax Act 2007 (NSW) (the Payroll Tax Act) provides:

(1) In this Division, a "relevant contract" in relation to a financial year is a contract under which a person (the "designated person" ) during that financial year, in the course of a business carried on by the designated person-

…

(b) has supplied to the designated person the services of persons for or in relation to the performance of work, or

…

There are exclusions from payroll tax under relevant contracts, which include where a person in the course of a business carried on by that person is supplied:

“with services for or in relation to the performance of work that are ancillary to the supply of goods under the contract by the person by whom the services are supplied or to the use of goods which are the property of that person” (under paragraph 32(2)(a));
“with services for in relation to the performance of work where … (iii) those services are provided for a period that does not exceed 90 days or for periods that, in the aggregate, do not exceed 90 days in that financial year and are not services for or in relation to the performance of work where any of the persons who perform the work also perform similar work for the designated person, for periods that, in the aggregate, exceed 90 days in that financial year” (under subparagraph 32(2)(b)(iii)(B));
“with services for in relation to the performance of work where … (iv) … those services are performed by a person who ordinarily performs services of that kind to the public generally in that financial year” (under subparagraph 32(2)(b)(iv)); or
“by a person (the "contractor") with services for or in relation to the performance of work under a contract … where the work to which the services relate is performed - (i) by two or more persons employed by, or who provide services for, the contractor in the course of a business carried on by the contractor” (under subparagraph 32(2)(c)(i)).

Uber’s contracts

The contract between Uber and a driver:

contains an acknowledgement that “Uber does not provide transportation services and is not a transportation carrier, but that its business is to provide access to its lead generation services rendered via the apps”;
contains an acknowledgement that “in providing services to riders, the driver or partner has a legal and business relationship with the rider and not Uber”;
“provide that the driver is entitled to charge the rider a fare for each completed trip and that Uber is appointed as a limited payment collection agent for the driver or otherwise will collect the fare from riders for and on behalf of the driver”;
“provide that Uber will determine the fare calculation but allow the driver to charge fares lower than those calculated by Uber”; and
“provide that Uber will remit to the driver the fare less any applicable service fee charged by Uber”.

The contract between Uber and a rider:

contains a description of the Uber’s services “as constituting a technology platform that enables users of the Rider App to arrange and schedule transportation with independent third-party providers of such services”;
contains an acknowledgement by the rider “that Uber does not provide transportation services or function as a transportation carrier and that all such transportation is provided by independent third-party contractors who are not employed by Uber”; and
includes confirmation by the rider “that use of the services may result in charges to the rider for the services they receive from a third-party provider”.

Judgement

The Court held that:

The contracts between Uber and its drivers are relevant contracts under paragraph 32(1)(b) of the Payroll Tax Act. In particular, Uber was supplied with the services of persons for or in relation to the performance of work (being driving the riders, rating the riders and referring other potential drivers).
The potential exemption under paragraph 32(2)(a) of the Payroll Tax Act for services for or in relation to the performance of work that are ancillary to … the use of goods which are the property of that person could not apply because of subsection 32(2B), which prevented the exclusion from applying where additional services or work (of a kind not covered by the relevant paragraph) are supplied or performed under the contract (ie the services of rating the riders and referring other potential drivers).
Likewise, the potential exemption under subparagraph 32(2)(b)(iii)(B) for the component of drivers who worked less than 90 days within a financial year did not apply for the same reason.
However, the payments to the riders were not deemed wages under subsection 35(1) of the Payroll Tax Act, as the were “not for or in relation to the performance of work relating to the relevant contract”. Instead, Uber was merely acting as “payments collection agent” for the driver – the driver being directly paid by the rider.

It is the last point that will be crucial going forward for similar cases. In the longer term, this judgement will need to be considered with similar cases relating to payments made to medical or other practitioners (which have held other payments to be deemed to be wages).

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Please contact us with assistance with advice on payroll tax or any other State Tax issues

Phil Broderick
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Nicholas Clifton
Principal Lawyer
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Meera Pillai
Associate
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