On 1 August 2025, the New South Wales Court of Appeal delivered a unanimous decision: Uber Australia is liable for approximately $81 million in payroll tax, plus interest, for payments made to its drivers over the 2015–2020 financial years.
This isn’t just a story about a tech giant-it’s a wake-up call for every business that relies on contractors, including SMEs.
How Did the Court Reach Its Decision?
Three key findings shaped the outcome:
- Payments to drivers counted as taxable wages.
Uber collected fares from riders and passed them on to drivers. The court ruled these payments were “for or in relation to the performance of work” and therefore taxable under the Payroll Tax Act. - Ratings were part of Uber’s business model.
Both driving and providing passenger ratings were found to be services supplied to Uber. Ratings were compulsory, not optional, making them integral to Uber’s platform. - Driving was not just an “ancillary service.”
Uber argued that drivers’ main contribution was the use of their own vehicles, with driving being incidental. The court rejected this, stating that driving was central to Uber’s business and could not be excluded from payroll tax.
Why This Matters for SMEs
This decision pushes payroll tax compliance into the spotlight. It’s not just about big tech—it directly impacts SMEs in industries like healthcare, finance, and professional services where contractors are common.
- Contractor risk exposure: If your business pays contractors, you could be liable for payroll tax under “relevant contract” provisions.
- Backdated liabilities: Payroll tax assessments can go back up to five years, meaning past arrangements may suddenly create big financial risks.
- Sector-specific concerns: Medical practices are already worried that engaging doctors as contractors could trigger large payroll tax bills.
For SMEs, the message is clear: payroll tax isn’t just an administrative headache—it’s a strategic risk that can affect cash flow, compliance costs, and even your business’s reputation.
What SMEs Should Do Next
While Uber prepares an appeal to the High Court, SMEs can’t afford to sit back. Now is the time to take proactive steps:
- Map all contractor arrangements – Understand exactly who you pay, how you pay them, and under what agreements.
- Review payroll tax exposure – Work with your accountant or tax advisor to assess whether your contractors fall within payroll tax rules.
- Strengthen your contracts – Ensure documentation clearly defines roles, responsibilities, and (where appropriate) exemptions.
- Stay across reforms – Payroll tax laws are evolving. Keep up to date with changes that could affect your business.
The Bigger Picture
This case is a timely reminder: payroll compliance extends beyond employees. Any payment arrangement—whether with contractors, consultants, or freelancers—could fall under payroll tax laws.
And the cost of non-compliance goes far beyond the tax bill itself. Legal fees, penalties, and brand damage can multiply quickly, turning what seems like a “contractor convenience” into a serious business liability.
Key Takeaway for SMEs
Don’t wait for the tax office to come knocking. The Uber case proves that no business is too big—or too small—to escape scrutiny.
Take action now: Review your contractor arrangements, get professional advice, and make sure your business is protected.
Because when it comes to payroll tax, prevention is always cheaper than the cure.
