Gig economy giants on notice - Court sides against Uber in payroll tax case

On 1 August 2025, a unanimous judgment was delivered by the NSW Court of Appeal (the Court) in Chief Commissioner of State Revenue v Uber Australia Pty Ltd [2025] NSWCA 172, a decision with widespread implications for businesses within the gig economy.

The judgement from the NSW Court of Appeal effectively overturned the previous decision of the Supreme Court in the case of Uber Australia Pty Ltd v Chief Commissioner of State Revenue [2024] NSWSC 1124.

Given the Court's complete reversal of the initial judgment and the substantial value of the payroll tax assessments, an appeal to the High Court is probable. As Uber has 28 days to file a Notice of Intention to Appeal, further developments in the matter warrant close attention.

First instance decision

Uber, in the Supreme Court, challenged six payroll tax assessments from the Chief Commissioner that amounted to a total of $81,515,923.

The central issue of the case was the application of the Contractor Provisions in Division 7 of the Payroll Tax Act 2007 (NSW). Specifically, the Supreme Court had to determine two things:

1. Whether a ‘relevant contract’ existed between Uber and its drivers
2. If such a contract was found to exist, whether the payments made under the contract were ‘for or in relation to the performance of work’.

In response to the first question, Hammerschlag CJ ruled that Uber’s contracts with its drivers qualified as ‘relevant contracts,’ based on the specific services the drivers provided to the company.

More notably, Hammerschlag CJ determined that payments from Uber to its drivers were not ‘for or in relation to the performance of work.’ The rationale was that Uber functioned solely as a payment collection agent. The payments, therefore, were made by Uber on behalf of the passengers for that purpose, and not "for or in relation to the performance of work." Based on this reasoning, the initial determination was that the payments to drivers could not be considered wages under section 35 of the Payroll Tax Act, which meant no payroll tax liability could arise.

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

Following the initial decision, the Chief Commissioner lodged an appeal, which was heard in the Court in Chief Commissioner of State Revenue v Uber Australia Pty Ltd [2025] NSWCA 172. On appeal, the Court re-examined many of the issues that were originally addressed at first instance.

The key issues of the decision were as follows:

1. Whether driving was a service supplied by drivers to Uber ‘under’ the driver contracts for the purposes of section 32(1)(b) of the Payroll Tax Act
2. Whether driving was ancillary to the use of the driver’s vehicle for purposes of section 32(2)(a) of the Payroll Tax Act
3. Whether amounts collected by Uber from riders and remitted to drivers were ‘for or in relation to the performance of work’ within section 35(1) of the Payroll Tax Act.

Issue 1 - driving as a service supplied by drivers to Uber

Uber sought to challenge the existence of a relevant contract by asserting that driving was a service supplied under the driver contracts, rather than a service provided to Uber itself. The Court ultimately rejected this argument, aligning with the primary judge's conclusion on the matter.

The Court concluded that transporting riders isn't an indirect or secondary part of the driver's contract. On the contrary, the Court found that this service is fundamental to Uber’s entire rideshare business model and, therefore, is a service provided directly to Uber.

Issue 2 - driving as an ancillary use

The existence of a relevant contract was challenged on the basis of an exemption, with the argument that the services supplied by drivers were ancillary to the use of their vehicles. Uber's argument was that the act of driving, provided by the driver, and the use of the vehicle, by the passenger, were two distinct yet interconnected matters.

The Court rejected Uber's argument that the driving service and the use of the vehicle were distinct, yet interconnected matters. Instead, it sided with the primary judge, concluding that the two are inseparable. As a result, the driving service could not be considered secondary or ancillary to the use of the vehicle.

Issue 3 - the purpose of amounts collected and remitted

The Court found that the primary judge erred in their interpretation of section 35(1) of the Payroll Tax Act. This error was based on the idea that there had to be a direct link between the payment and the work performed for the payment to be considered ‘for or in relation to the performance of work’. While the Court was not specific about the exact strength of the connection required, it was clear that the primary judge's interpretation was too narrow.

The Court determined there was a sufficient connection between the payments made by Uber and the work performed by its drivers under the contract. Consequently, these payments were deemed to be wages under section 35(1) of the Payroll Tax Act.

This was the central point of contention at the initial hearing and ultimately led to the reversal of the first instance judgement.

The Court emphasised that Uber's obligation to account for amounts received from riders, minus the service fee, did not alter the nature of the payments as being related to the performance of work.

The Court agreed with the Chief Commissioner that the primary judge had erred in departing from the decisions in Thomas & Naaz and Optical Superstore. Consequently, it overturned the decision that Uber’s payments were not taxable wages because Uber had been acting as a ‘payment collection agent’.

The Court overturned the decision at first instance and concluded that the payments made to Uber were taxable wages for payroll tax purposes.

Broader Implications for businesses to consider

The Court's decision will have significant implications for other businesses, particularly for those that operate within the gig economy or other industries where intermediaries act as collection agents on behalf of service providers. Some of these business types or industries include those in the gig economy, such as rideshare or delivery services, where platforms collect payment on behalf of the service provider, as well as those industries that offer similar arrangements in other sectors, such as medical centres, mortgage and insurance brokers, and financial planners. All these operators should carefully consider their current payroll tax position.

Should Uber choose to appeal the decision, the High Court's final verdict will be of paramount importance to all businesses operating in the gig economy.

Given the ongoing legal developments, impacted business should take this opportunity to review their arrangements and ensure that appropriate records and documentation is maintained as it is likely that additional revenue office audit activity is likely to be forthcoming.

If you have any questions or wish to discuss how this ruling may affect you, please do not hesitate to contact your relevant BDO employment tax adviser.