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High Court loss leaves Uber with $81 million tax bill
The High Court ruled six to one that Uber counts as an employer for NSW payroll tax, making the fares it remits to drivers taxable as wages.
- Uber lost its High Court appeal against a payroll tax bill of about $81 million in NSW, with the court ruling six to one that the fares it remits to drivers are deemed wages.
- The joint judgment found Uber is not a mere “limited payment collection agent” because it can adjust a fare calculation or cancel a fare entirely.
- Justice Steward dissented, describing drivers as “independent business people” who run their own businesses.
Uber lost its High Court appeal against a payroll tax bill of about $81 million, with five judges deciding the rideshare company “is liable to pay payroll tax in respect of the remitted fares.”
The court dismissed Uber Australia’s appeal with costs in a six-to-one decision, finding the fares Uber passes on to drivers are deemed to be wages under NSW payroll tax law.
NSW’s Chief Commissioner of State Revenue assessed the bill for the financial years ending June 30, 2015 to June 30, 2020, treating most of the money Uber collected from riders and remitted to drivers as wages.
The decision reaches into the gig economy with contractor rules NSW introduced in 1985 to stop businesses avoiding payroll tax by replacing staff with contractors, deeming Uber an employer and its drivers employees for payroll tax purposes.
Those rules have continued “always speaking in the present” to participants in the gig economy, Chief Justice Gageler wrote in separate reasons reaching the same result.
Uber argued the driving services were not supplied to it, but the joint judgment found drivers “agree with Uber to perform particular driving services, to particular standards.”
“The driving services are an essential component of Uber’s rideshare system business,” the judges wrote, adding that Uber “has substantial control over drivers.”
The control includes blocking drivers from the Driver App for breaching Uber’s Community Guidelines, with a driver able to lose access for falling below a minimum average rating or soliciting payment outside the Uber system.
The judges said a driver’s position before pickup “may be likened to that of a casual employee,” with no obligation to accept a trip but obligations under the contract once work starts.
“Contrary to the labels used in the Driver Contract, Uber is not a mere ‘limited payment collection agent’,” they wrote, citing its rights to “unilaterally adjust a fare calculation or cancel a fare entirely.”
Uber has “structured its rideshare system business so that payments from riders are funnelled through it,” the judges said, giving it “substantive control over the fares before they are remitted to drivers.”
The rideshare company’s argument that driving was merely ancillary to the use of drivers’ own cars also failed, with the judges finding “the supply of driving services, rather than the use of a car” was the contract’s primary object.
Justice Steward dissented, writing, “I very much regret that I am unable to agree with my colleagues.”
He described drivers as “independent businesspeople who acquire lead generation services from Uber to enable them to conduct their businesses of carrying riders.”
“Uber benefits from the supply of Transportation Services by drivers to riders,” he wrote, but that did not involve the supply of “any service comprising the performance of work to Uber.”
There was no suggestion the contract was “some form of disguised employment,” he added, saying drivers “supply their own cars, maintain and insure those cars, and decide when and from where they will undertake Transportation Services.”
The High Court, which heard the appeal on April 8 this year, ordered Uber to pay costs, leaving the payroll tax assessments in place.
The ruling follows a 2024 decision by a Supreme Court of NSW judge to revoke the assessments, finding the remitted amounts were not deemed wages, which the NSW Court of Appeal later overturned.
In a statement to The Money Edition, Uber said it respected the decision.
“We do not believe digital marketplaces like Uber should be captured by payroll tax legislation designed for traditional employment and contracting arrangements,” a spokesperson said.
“While the High Court has determined how the existing law applies, Governments must now consider whether these laws remain fit for purpose in an economy where technology platforms connect independent service providers directly with customers.
“This decision could have significant unintended consequences beyond rideshare, affecting intermediary business models across the economy, including mortgage brokers, service-based marketplaces, medical practices and other healthcare services.
“It sets an alarming precedent at a time when businesses across Australia already face significant red tape and increasing cost pressures.”