The Supreme Court of NSW has overturned six payroll tax assessments that were issued to Uber, amounting to over $81 million, in a significant legal victory for the rideshare company.
In the case Uber Australia Pty Ltd v Chief Commissioner of State Revenue [2024] NSWSC 1124, Uber challenged the Chief Commissioner’s decision to disallow the company’s objection to the hefty payroll tax assessments. The court was asked to review whether Uber’s contracts with its drivers qualified under payroll tax laws.
The Payroll Tax Act & Contractor Provisions
The Payroll Tax Act 2007 requires employers to pay tax on wages for services performed by employees within the state. However, Division 7 of the Act, known as the “Contractor Provisions,” extends this tax liability to payments made under certain contracts, even when services are not provided by employees directly.
The Chief Commissioner had assessed Uber under these provisions, claiming that the payments made to drivers were effectively wages because they were related to services provided under a “relevant contract.”
Uber’s Argument: Drivers Aren’t Employees
Uber contended that its contracts with drivers do not fall under the “relevant contract” definition in the Act. The company argued that drivers provide transportation services directly to riders, not to Uber, and therefore should not be considered Uber’s employees for payroll tax purposes.
Uber further argued that its arrangements with drivers are excluded from the payroll tax rules under certain sections of the Act:
– Use of Goods Exemption (s 32(2)(a)): Uber claimed that drivers’ work is ancillary to the use of their own vehicles.
– Short-Term Services Exemption (s 32(2)(b)(iii)): Some drivers provided services for less than 90 days in total.
– Public Services Exemption (s 32(2)(b)(iv)): Some Uber drivers also operated as taxis or hire cars, providing services to the public independently of Uber.
Uber also argued that the payments made to drivers were not wages under the Act, as they were not made in connection to a contract between Uber and the driver for the performance of work.
The Chief Commissioner’s Response
The Chief Commissioner disagreed with Uber’s interpretation, asserting that the exclusions in the Act did not apply. Under **s 32(2B)**, the Commissioner argued that Uber’s contracts involved additional services that fell outside of the exclusions, thus making Uber liable for payroll tax.
The Court’s Ruling: A Win for Uber
Justice David Hammerschlag acknowledged the complexities in applying payroll tax provisions to modern business models like Uber’s, which were not foreseen when the laws were created. In his judgment, he concluded:
– Uber’s contracts with drivers and partners did involve the provision of services related to the performance of work.
– Although drivers’ services were ancillary to the use of their own vehicles, the exclusion did not apply because Uber also received additional services.
– In some instances, drivers provided services for less than 90 days, but this exclusion was also nullified by **s 32(2B)**.
– Most importantly, the payments made by Uber to drivers were not considered wages under the definition in **s 35(1)**.
As a result, Justice Hammerschlag ruled in Uber’s favour, revoking all six payroll tax assessments issued by Revenue NSW.
The Implications
This ruling marks a significant win for Uber in its ongoing legal battles regarding the employment status of its drivers. The case highlights the difficulties in applying traditional tax laws to the gig economy and sets a precedent for how similar cases might be approached in the future.
The court’s decision relieves Uber from a multi-million-dollar tax liability, while also raising questions about how Australian payroll tax laws will adapt to modern, non-traditional work arrangements.
