$81m payroll tax bill for Uber a ‘wake-up call’ for businesses

An NSW court has issued a landmark decision, ruling that Uber is an employer of its drivers for payroll tax purposes, bringing wide-ranging implications for contractor-heavy industries.

Editor’s note: This story first appeared on HR Leader’s sister brand, Accounting Times.

On 1 August 2025, the NSW Court of Appeal unanimously determined that Uber drivers were employed by the company under “relevant contracts”, and amounts paid by Uber to its drivers were wages under the Payroll Tax Act 2007.

The landmark decision could have sweeping implications for other gig economy platforms by strengthening the legal precedent that contract workers aren’t automatically exempt from payroll tax, legal experts have said.

“The Uber appeal decision is a wake-up call for businesses that rely heavily on contractors or platform-based workforces,” Lisa To, head of tax and private clients at national law firm Bartier Perry, said.

“Operators in the gig economy, mortgage broking, or medical sectors who engage workers as ‘independent contractors’ may still fall within the wide net of payroll tax under the ‘relevant contract’ provisions. Even if those individuals are not considered employees in other contexts, revenue authorities are likely to treat them as subject to payroll tax.”

The decision overturned a 2024 judgment made by the NSW Supreme Court, which found that Uber was not liable for payroll tax on the basis that payments made to the drivers were not “taxable wages”.

The latest court judgment has left Uber liable to pay $81 million in payroll taxes, plus interest, based on the amounts the NSW Chief Commissioner of State Revenue assessed it to have paid to its drivers during the 2015 to 2020 financial years.

The case focused on three central issues. Firstly, the court determined that amounts collected by Uber from riders and remitted to drivers were taxable wages, as they were “for or in relation to the performance of work”.

Secondly, it found that the rating of passengers was a service supplied by the drivers to Uber under their contracts, given that rating passengers was compulsory for drivers.

“The Appeal Court found that the drivers’ ratings of riders were necessarily provided to Uber under the drivers’ contracts. These services were also caught under the ‘relevant contract’ provisions of the act,” To said.

The third issue related to whether driving and rating were ancillary to the use of the driver’s vehicle. Uber argued that it was eligible for a payroll tax exemption, which applied when the provision of labour was ancillary to the supply or use of goods.

The court found that driving was a central part of the service offered by Uber and generated financial benefits for the company, and therefore was not eligible for the exemption. It added that the “rating” service was similarly integral to the use of the platform, as it contributed to its safety.

Businesses that employ contract workers should take note of the decision, and take proactive steps to identify whether their non-employee workers could be covered under “relevant contract” provisions outlined in payroll tax law.

“Businesses should take practical steps to mitigate payroll tax risks, starting with identifying all non-employee workers and reassessing whether their roles fall within the ‘relevant contract’ provisions,” To said.

“This includes reviewing the level of control, integration into the business, and actual working arrangements.”

She recommended that firms that believe they could be affected take stock of their affairs over the past five years, given that revenue authorities had the power to investigate payroll tax liabilities retrospectively.

To avoid unexpected tax liabilities and associated penalties, she added that companies should ensure that their contractual agreements reflect commercial reality and be proactive with authorities if issues are identified.

“Contractor agreements should be updated to reflect the commercial reality, with clear terms around independence, delegation, and the use of tools,” she said.

“Engaging early with revenue authorities or making voluntary disclosures can significantly reduce penalties, often by up to 80 per cent, at a time when there is growing focus on recovering interest and penalties.”