Uber loses Australian tax appeal, faces $81m bill

Uber will pay 81m in payroll tax to the New South Wales tax office after Australia’s High Court dismissed the ridesharing company’s appeal against the tax assessment, ruling that payments to its drivers qualify as wages.

The ruling, delivered on Wednesday, according to ABC News, found that Uber’s drivers operated under contracts with the company and that fares paid to them were wages for the purposes of payroll tax legislation.

The decision followed a legal challenge by Uber against six payroll tax assessments covering the 2015 to 2020 financial years.

The ridesharing company had argued that it was merely a payment collection agent that transferred fares to drivers after deducting service fees, insisting that its arrangements were administrative and should not attract payroll tax.

However, the High Court, by majority, rejected the appeal, finding that there was a direct relationship between the services provided by drivers and the fares they received.

Chief Justice Stephen Gageler said the connection between drivers’ performance and the payments made to them meant the fares qualified as wages under the relevant tax laws.

In a joint judgment, Justices Michelle Gordon, James Edelman, Jacqueline Gleeson, Jayne Jagot and Robert Beech-Jones also agreed that the contractor provisions were intended by parliament as a measure to “catch schemes designed to avoid liability for payroll tax”.

They upheld the lower court’s position that Uber’s business model depended on collecting payments from riders for each trip and retaining a service fee, while drivers provided the services that enabled the company to earn those fees.

Drivers clearly ‘supply’ a service to Uber by doing something that is necessary for Uber to derive service fees and to continue its business,” the joint judgment said.

“The remitted amounts from Uber to a driver are paid or payable for or in relation to the performance of work (driving services) relating to a relevant contract … and are therefore deemed to be wages.”

Justice Simon Steward dissented from the majority decision.

The ruling also leaves open the possibility of other Australian states adopting broader interpretations of tax provisions aimed at preventing businesses from avoiding payroll tax obligations through contractor arrangements.

Reacting to the judgment, Uber said it respected the court’s decision but maintained that digital marketplaces should not be required to pay payroll tax.

“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,” the company said in a statement.

“It sets an alarming precedent at a time when businesses across Australia already face significant red tape and increasing cost pressures.”

Uber called on state governments to modernise payroll tax laws to reflect how digital platforms operate and provide businesses with greater certainty.

The Transport Workers’ Union welcomed the judgment, describing it as a “critical reality check to companies seeking to skirt our laws”.

The union’s national secretary, Michael Kaine, said companies engaging workers who might not be classified as employees would still have to meet their tax obligations.

“Uber’s entire business model has been insidiously created by trying to distance itself from obligations under our laws, while reaping all the profits,” he said.

“But the time is up for gig behemoths and other tech companies who have used loopholes to squeeze from our communities and contribute nothing in return.”

NSW Finance Minister Courtney Houssos also welcomed the ruling, describing it as an important decision.

She said payroll tax was a key part of the state’s revenue base and helped fund essential public services.

“Local businesses pay their fair share. Uber should pay their fair share too,” she said.