Chief Commissioner of State Revenue v Uber Australia Pty Ltd [2025] NSWCA 172

In a wide ranging decision, the New South Wales Court of Appeal has overturned the earlier Supreme Court decision (see our discussion here https://sladen.com.au/news/2024/9/12/uber-not-liable-for-payroll-tax-new-south-wales-supreme-court-decision) and held that payments to Uber drivers were subject to payroll tax as deemed wages.

This decision will have impact across all Australian States and Territories for any business using contractors to provide services to its clients or otherwise used in its business.

As Uber is a key part of the “gig economy”, it is expected that other similar services will also be subject to payroll tax if this case is not overturned on any possible appeal.

Key findings

The Court of Appeal held that Uber drivers provided services to Uber under individual driving contracts.

The driving contracts governed or controlled the driver’s performance.

Further, the driving services were not ancillary to the use of the vehicles and so no relevant exemption applied.

Uber was not successful in challenging the earlier decisions of Optical Superstore and Thomas and Naaz – in particular, it was held that the payments made to derivers were “paid or payable” by Uber.

Background

From our article on the earlier Supreme Court decision - 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

Again, from our earlier article, 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”.

At first instance, the Supreme Court held that the contracts between Uber and its drivers were “relevant contracts” - holding that 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).

However, the payments to drivers were not deemed wages as they 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.

Court of Appeal decision

The Court of Appeal again identified three services that were provided by the drivers:

transporting riders (ie the passengers);
rating passengers at the end of each trip; and
referring other drivers to Uber.

The Court of Appeal considered 11 main issues.

Whether driving was a service supplied by drivers to Uber under the driver contracts for the purposes of s 32(1)(b) of the Payroll Tax Act

The Court of Appeal held that the driving service provided a financial benefit for Uber and was the foundation of Uber’s ridesharing business.

The service of driving was provided to Uber under the drivers contracts. Those contracts governed or controlled the performance of the driving services. On this basis, Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40 was applied.

Second, whether rating of passengers by drivers after each ride was a service supplied by drivers to Uber under the driver contracts for the purposes of s 32(1)(b) of the Payroll Tax Act.

This was held to be a service necessarily provided to Uber in the exercise of the drivers contracts and was therefore supplied under those contracts.

Third, whether rating was de minimis such that it should be disregarded.

The rating service was held not to be de minimis in the context of the drivers contracts as a whole.

Fourth, whether drivers referring other potential drivers to Uber was de minimis such that it should be disregarded.
Fifth, whether referring was supplied under a contract separate to the driver contract.

The referral services were held not to be de minimis as it was not so insubstantial in the context of the contractual arrangements between Uber and the drivers. However, it was held that the payment fo the referrals were under separate contractual arrangements to the driver contracts. As these contracts were separate to the driver contracts, no payroll tax was payable on the referral fees.

This illustrates the point that the actual contractual arrangements and services provided are necessary to be analysed between the parties – not all payments between contractors and deemed employers will be subject to payroll tax.

Sixth, whether driving was ancillary to the use of the driver’s vehicle for purposes of s 32(2)(a) of the Payroll Tax Act.

The exemption under paragraph 32(2)(a)) did not apply as the driving service was not ancillary to the use of the car – being one and the same.

Seventh, whether rating was ancillary to the use of the driver’s vehicle for purposes of s 32(2)(a) of the Payroll Tax Act.

The rating services was bound up in the use of the car, but this was not sufficient to establish the exemption under paragraph 32(2)(a) – use of the car was not the principal or dominant characteristic of the contract (as that was the driving services).

Eighth, whether s 32(2B) of the Payroll Tax Act had the effect of disapplying s 32(2) if driving was covered by s 32(2)(a).

Given the conclusions that neither driving or rating were services which were ancillary to the use of the vehicle and that referrals were not a service supplied under the driver contracts, it was not necessary to determine this point (subsection 32(2B) prevents the exemptions in subsection 32(2)(a)-(d) from applying where additional services or work are provided or supplied under the contract – as none of paragraph 32(2)(a)-(d) applied).

Ninth, whether amounts collected by Uber from riders and remitted to drivers were “for or in relation to the performance of work” within s 35(1) of the Payroll Tax Act.

Section 35 deems amounts paid or payable by an employer for or in relation to the performance of work relating to a relevant contract are taken to be wages paid or payable and therefore subsject to payroll tax.

The payments by Uber to drivers were held to be payments related to the work performed by the drivers in transporting riders, notwithstanding that these amounts were part of the payments received by Uber from riders in discharge of the riders’ obligation to pay for the transportation service obtained through use of the Rider App and therefore subject to payroll tax.

Tenth, whether amounts collected by Uber from riders and remitted to drivers were “paid or payable” by Uber within s 35(1) of the Payroll Tax Act.

The amounts remitted to riders were paid or payable by Ubder and the challenges to Tomas and Naaz or Commissioner of State Revenue v Optical Superstores Pty Ltd [2019] VSCA 197 were not upheld.

Eleventh, whether the primary judge erred in ordering remission of any premium interest payable.

The initial 50% waiver of the premium rate of interest, being the approach of the Chief Commissioner was upheld and no further remission was required by the Court of Appeal.

Impact

This case is likely to be keenly felt by other rideshare or “gig economy” type apps that match service providers with customers. Likewise, revenue officers who have been applying the recent “relevant contractor” provision cases to medical clinics and similar operations will be emboldened by the New South Wales Court of Appeal’s reluctance to overturn the Thomas and Naaz or Optical Superstore decisions.

A High Court challenge to this decision would seem to be a realistic possibility, given the amounts in question, if so, it will be interesting to see the High Court revisit this important area and to see whether the High Court approves of the Court of Appeal’s approach, or that of the single justice decision in the earlier Supreme Court case.

***

Please contact us with any questions on State Tax issues.

Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E pbroderick@sladen.com.au

Nicholas Clifton
Principal Lawyer
T +61 3 9611 0154 | M +61 401 150 955
E nclifton@sladen.com.au