Uber payroll tax appeal: High Court to review $81 million NSW contractor case

The payroll tax net of Australia’s state and territory revenue office’s continues to be cast wide, capturing many contractor arrangements that were previously assumed to be non-taxable for payroll tax purposes.

On 1 August 2025, in Chief Commissioner of State Revenue v Uber Australia Pty Ltd [2025] NSWCA 172, the Full Court of the New South Wales Court of Appeal overturned a first instance decision, the effect being that held Uber was liable to approximately $81 million in payroll tax on payments made to drivers.

On 4 December 2025, the High Court of Australia granted Uber’s request for special leave to appeal this decision.

The High Court outcome will have impact across all Australian States and Territories for any business using contractors in its business to provide services to its clients. While the High Court has traditionally steered clear of state tax appeals, the Court’s determination and interpretation of these provisions will be welcomed.

Background

The proceedings concern the contractor provisions Division 7 of Part 3 of the Payroll Tax Act 2007 (NSW). In particular:

1.    paragraph 32(1)(b) of the Payroll Tax Act defines a “relevant contract” as a contract under which a designated person“ has supplied to the designated person the services of persons for or in relation to the performance of work”; and

2.    under subsection 35(1) of the Payroll TaxAct, payments made to contractors under a relevant contract for or in relation to the performance of work are deemed wages for payroll tax purposes.
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While the case concerns the New South Wales provisions, the payroll tax contractor provisions are largely harmonised across all Australian states and territories (except Western Australia).

The Chief Commissioner assessed Uber for approximately $81 million in payroll tax on amounts paid to drivers for the 2015 to 2020 financial years. Uber sought a review of the decision, and was initially successful at first instance, but the Chief Commissioner appealed the decision.

On 1 August 2025, the New South Wales Court of Appeal unanimously allowed the Chief Commissioner’s appeal and found Uber liable for payroll tax. The decision closely analysed the rightsand obligations under the contracts between the drivers and Uber.

Key Issues‍

The Court of Appeal dealt with eleven issues in its decision, but the key issues with wide ranging application are:

1.     first, whether driving was a service supplied by drivers to Uber “under” the driver contracts for the purposes of paragraph 32(1)(b) of the Payroll Tax Act? (Issue 1)

2.     second, whether amounts collected by Uber from riders and remitted to drivers were “for or in relation to the performance of work” within subsection 35(1) of the Payroll Tax Act? (Issue 9)

3.     third, whether amounts collected by Uber from riders and remitted to drivers were “paid or payable” by Uber within subsection 35(1) of the Payroll Tax Act? (Issue 10)

Key Findings

The Court found the driving service provided by drivers was the foundation of Uber’s ride sharing business and the direct source of financial benefit to Uber through its service fee. The Court found also found that the drivers contract governed performance of the service, and the drivers adhering to those requirements constituted a service to Uber. Accordingly, the drivers were providing the driving service to Uber “under” the driver contracts for the purposes of paragraph 32(1)(b) of the PayrollTax Act.

On the “for or in relation to the performance of work” issue, the Court rejected the primary judge’s approach that required “reciprocity or ascertainable calibration” between the money paid to the driver and the work done for Uber (as opposed to work done for the end passenger). The Court held that Uber’s payments to drivers was calculated by reference to the driving service (e.g. duration and time of trip), less Uber’s service fee, which itself was calculated as a percentage proportion of the fare. Therefore, there was a direct relation between the driver’s performance of work and what was payable by Uber to drivers for the purposes of subsection 35(1) of the Payroll Tax Act.

Finally, Uber argued that amounts were not “paid or payable” by Uber to the drivers because the riders were paying the drivers, and Uber was merely collecting the funds on the drivers behalf.  On this issue, the Court determined to not overturn the two intermediate appellate court decisions which deal with similar arguments: Commissioner of State Revenue v Optical Superstore Pty Ltd [2019] VSCA 197 and Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40. The Court held that the drivers having a beneficial ownership to the fee does not mean those amounts are not “paid or payable” by Uber to the drivers within subsection 35(1) of the Payroll Tax Act.

Takeaways

The Court of Appeal decision continues the shift in payroll tax administration that followed Optical Superstore. Courts and revenue authorities will keep testing contractor arrangements, particularly where a business sits between customers and the people who perform the work.

Do not assume models where a business is a “mere collection” or “pass-through” agent avoids payroll tax. Any payment from a business to a contractor has potential payroll tax implications.

A High Court decision is expected at some point in 2026. It is hoped that the decision will provide a definitive guidance on the payroll tax contractor provisions. We anticipate that the positions reached in Commissioner of State Revenue v Optical Superstore Pty Ltd [2019] VSCA 197 and Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40 will be challenged, however it remains to be seen whether the High Court will overrule those authorities.

To discuss your payroll tax exposure under the contractor provisions and to stay close to the High Court appeal, contact Velocity Legal’s tax team.