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Uber’s $81m payroll tax hit: what it means for the gig economy and your business

Posted by Joel Kurta, Nicholas Wookey, Laura Hussey and Jack Stuk on September 17, 2025
tax law
High Court
payroll tax
taxable wages
Payroll Tax Act 2007 (NSW)
the Uber appeal
wages
Uber payroll tax - KHQ Lawyers

On 1 August 2025 the NSW Court of Appeal handed down its judgment in the NSW State Revenue and Uber payroll tax saga (the Uber Appeal). Five judges unanimously held that payments Uber made to drivers were “wages” within the context of section 35 of the Payroll Tax Act 2007 (NSW) (the Act) and thus made an order for Uber to pay in excess of $80 million in payroll tax to the NSW Revenue.  

With a harmonised payroll tax system across Australia, this decision has significant implications for the gig economy Australia-wide. We expect revenue authorities in other states to use this case as a catalyst to initiate audits and apply the relevant provisions more broadly – in turn significantly increasing the payroll tax liabilities of platform-based businesses as well as those industries that offer similar arrangements in other sectors such as mortgage and insurance brokers, allied health and medical centres, and financial planners. Uber has announced its intention to apply for Special Leave to appeal against this decision to the High Court of Australia. 

Payroll tax – a brief overview 

Payroll tax is a heavily litigated area of tax due to its broad and all-encompassing provisions to cover a variety of service arrangements extending far beyond the usual employer/employee relationship.  Specific to the Uber Appeal, the “relevant contract” provisions contained within Division 7 of the Act have the ability to apply to a multitude of service business relationships extending far beyond those likely envisaged by the legislature at the time in which they were introduced. 

The key provisions of the Act, relevant to the Uber Appeal, are: 

  • Section 6 of the Act provides that payroll tax is imposed on all “taxable wages”.  
  • Under section 6, the “employer” by whom such wages are paid or payable is liable to pay the tax. The term “employer” is defined in section 3(1) to mean “a person who pays or is liable to pay wages” and is said to include (amongst other things) a person taken to be an employer by or under the Act. 
  • Section 33(1)(b) provides that a person “to whom during a financial year, under a relevant contract, the services of persons are supplied for or in relation to the performance of work” is taken to be an employer in respect of that financial year. Section 34 has the correlative effect in relation to the other contractual party, deeming them to be an employee. 
  • Building upon those sections, section 35(1) states that amounts paid or payable by an employer “for or in relation to the performance of work relating to a relevant contract … by an employee under a relevant contract are taken to be wages paid or payable during that financial year”. Payroll tax then applies to such deemed wages. 

First instance 

Before the lower NSW Supreme Court, Hammerschlag CJ as the single judge found in favour of Uber that payroll tax was not payable on almost all payments that Uber made to its drivers. Hammerschlag CJ held that, although the contracts between Uber and its drivers were “relevant contracts”, amounts paid by Uber to its drivers were not paid “for or in relation to the performance of work” by the drivers. Rather, it was held that Uber (in these circumstances) was a mere collection agent for the monies owing to drivers passing those customer/rider payments on to the drivers net of a services fee (retained by Uber from payments received from customer/riders) rather than remunerating the drivers for their work. Thus, Hammerschlag CJ found those payments made to drivers could not be said to be “for or in relation to the performance of work” as required under section 35(1) of the Act and, as a result, could not be “taxable wages”. 

Uber Appeal 

Uber broadly made the argument that the “relevant contracts provisions” were introduced as a way to prevent tax avoidance that might otherwise come about by replacing traditional employment relationships with independent contractors. Uber further argued that the payroll tax wasn’t designed for a gig economy business like itself, and that they were simply supplying a technology app to drivers.  

Notwithstanding the observed “conceptual complexities” that Uber’s high-level arguments gave rise to, the Full Court held contrary to the lower court that Uber: 

  1. was a deemed employer of its drivers; 
  2. made payments to drivers which constituted “wages”; and  
  3. was not exempt from paying payroll tax under the “ancillary” exemption.  

Deemed employer – substance over form 

As to whether driving was a service supplied by drivers to Uber “under” the driver contracts for the purposes of section 32(1)(b) of the Act, the Court held that the transportation of riders to their destination was not merely of assistance to Uber in some indirect or collateral way. That finding was despite Uber’s contractual structuring and its supposed role as a “payment facilitator” or “mere collection agent”.  

The driving service provided by the drivers (to transport riders and, in the case of UberEats, goods) was found to be a service to Uber given that ridesharing and transport services is the foundation of Uber’s business and clearly generates financial benefit for Uber in the form of a services fee. 

Payments “for or in relation to the performance of work” 

The Full Court held that the primary judge had erred in his application of previous “relevant contracts” cases Optical Superstore1 and Thomas and Naaz2 insofar as he found that the payments made to the drivers were not “for or in relation to their performance of work”. The Court determined that there was, in fact, a direct relationship between the performance of work and what was payable by Uber to drivers. 

The fact that Uber has an obligation to pay drivers for amounts received from riders (less the services fee) as a “mere collection agent” or otherwise did not change the nature of the payments as being in relation to the performance of work. Importantly the Full court thereby rejected Hammerschlag CJ’s conclusion that a mere collection agency relationship allowed such payment intermediary relationships to fall outside the net of “taxable wages” for payroll tax purposes. 

Any exemption? 

Consistent with the primary judge, the Full Court agreed that the services of driving and referring others to Uber as drivers were not ancillary to the use of the driver’s vehicle. As a result, the exemption under section 32(2)(a) of the Act for ancillary services to the use of the driver’s car(s) did not apply. Instead, the Court accepted that the driving service is inseparable from the use of the vehicle. This is because the Full Court considered the driving service and the use of the driver’s vehicle were inherently linked. Hence, it could not be said that one was ancillary to the other as opposed to the service of driving being ancillary to the provision of the vehicle. 

Where to next? 

As stated above, Uber intends to apply for special leave to appeal the decision to the High Court of Australia (HCA).  Whether the HCA will hear an appeal against a unanimous and full-constituted NSWCA judgment is questionable. HCA guidance on these frequently litigated provisions would be welcome, however it has a discretion as to whether or not it will hear an Uber appeal from the Full court decision. 

If your business engages service contractors or operates within the platform economy, this case is a timely reminder to review your payroll tax exposure. With revenue authorities nationwide potentially using the Uber Appeal as a springboard for audits and broader application of the relevant provisions, now is the time to act. There may be opportunities to restructure your business service arrangements to mitigate risk including eligibility for specific exemptions or to apply for de-grouping relief where appropriate. If you have any questions or would like to take proactive steps to ensure your tax affairs are compliant and future-proof, please reach out to a member of our Tax & Structuring team. 

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