The Label Was Never the Law
If a driver is called a contractor and the platform a payment agent, the payroll tax question is assumed to answer itself. Australia’s highest court has now said otherwise, and the bill runs to eight figures.
On Wednesday the High Court of Australia dismissed Uber’s appeal against the New South Wales payroll tax assessment covering the tax years from 2015 to 2020. Six of the seven justices found for the revenue authorities. The bill is $81m in unpaid payroll tax. Uber was first handed that bill in 2021, and the case turned on six separate NSW payroll tax assessments. Uber must also pay the costs of the NSW Chief Commissioner of State Revenue.
Uber’s defence rested on a description of its own business. The company argued it was merely a payment collection agent that passed the fare to the driver after deducting a service fee. On that account its drivers were not employees, and the money that reached them was not wages under state law. Uber further argued that its drivers were not providing driving services directly to the company, and that no connection existed between the fares it paid out and the work performed. The argument had already won once: Uber beat the assessment in the NSW Supreme Court. The Court of Appeal overturned that result last year, and Wednesday’s decision closes the company’s legal avenues in Australia on this assessment.
The majority did not accept the description. It found that Uber had structured its rideshare system so that payments from riders are funnelled through the company. That structure gave Uber substantive control over the fares before they were remitted to drivers. Control of that kind let the company deduct its service fee, and it let the company change or cancel the fare entirely. The question was never what the parties called the arrangement. It was who held the money and who could move it.
Provisions That Keep Speaking in the Present
The mechanism the court used is older than the gig economy. Chief Justice Stephen Gageler noted that payroll tax laws in several states were adjusted late in the last century to capture more revenue from contractual arrangements designed to disguise the true nature of a working relationship. Those contractor provisions, he wrote, have continued to be “always speaking in the present” to participants in the gig economy that emerged this century. [1] The purpose was to look past the paperwork at the working relationship underneath it.
A joint judgment from Justices Michelle Gordon, James Edelman, Jacqueline Gleeson, Jayne Jagot and Robert Beech-Jones made that purpose explicit. The contractor provisions, they found, were intended by parliament as one measure to catch schemes designed to avoid liability for payroll tax. They agreed with the lower court that Uber’s business model depends on collecting money from riders trip by trip and keeping a service fee, and that the driver’s service is what allows Uber to do so legally. The judgment states that drivers “supply” a service to Uber by doing something necessary for the company to derive its fees and continue trading. [1] The amounts remitted to drivers are therefore deemed to be wages.
One justice disagreed. Simon Steward dissented, leaving his objection on the record but not the outcome. Gageler noted that contractor provisions had recently been re-enacted in both NSW and Victorian tax legislation. The legal expert Celeste Black wrote last year that the case would probably influence the payroll tax obligations of companies with gig workers across Australia. [1]. The judgment also leaves the door open for other states to pursue more aggressive interpretations of tax provisions designed to protect the traditional employer-employee relationship from manipulation by so-called contractors used to replace wages staff. [2].
One Hundred Million and Counting
The $81m is a floor, not a ceiling. The figure covers the tax years from 2015 to 2020 only. The ruling is likely to leave Uber with a significant bill for subsequent years, which would push the total well over $100m. [1].
Uber said it respected the decision while disputing that digital marketplaces like it should have to pay on this basis. Its position is that platforms connecting drivers and riders differ from employers in the conventional sense. The company warned that the outcome could have “significant unintended consequences” for other businesses.
The Transport Workers’ Union read the result differently. It called the decision a “critical reality check to companies seeking to skirt our laws”. Union members warned gig economy giants that their “time is up” for “skirting” Australian laws. [2].
On the government side, the NSW finance minister, Courtney Houssos, described payroll tax as a key part of the state’s tax base. Only about one in 20 companies meet the threshold to pay it, according to the NSW government. [1]. The tax helps fund essential services that families and households rely on, and local businesses pay their share. [1]. Her closing line was directed at the appellant: “Uber should pay their fair share too.” [1] What the ruling settles:.
- The NSW Supreme Court win that once looked like Uber’s settled position.
- The assumption that contractor provisions drafted last century cannot reach work organised by an app. -