“Local businesses pay their fair share. Uber should pay their fair share too.”
Because similar laws exist in every state and territory except Western Australia, it is possible that Uber and “gig worker” businesses like it will face a deluge of tax assessments, with revenue authorities newly empowered by the High Court ruling.
A spokeswoman for Uber said the company would respect the High Court’s decision, although it disagreed. “We do not believe digital marketplaces like Uber should be captured by payroll tax legislation designed for traditional employment and contracting arrangements.”
The company said the ruling could have “unintended consequences” and called on governments to consider whether payroll tax laws “remain fit for purpose in an economy where technology platforms connect independent service providers directly with customers”.
The legal fight leading to Wednesday’s loss began in 2021, when Uber objected to the $81.5 million in payroll tax NSW’s tax commissioner had ordered it to pay for 2015 to 2020.
Companies normally pay payroll tax on employees’ wages, but there are some sections of the law that extend payroll tax to contractors, the category that Uber drivers fall into. The NSW tax commissioner argued Uber drivers fell within these so-called “contractor provisions”, which apply where a company agrees to pay a contractor in exchange for “services” (as opposed to goods).
Uber objected to the assessment, claiming it was merely a “payment collection agent” for its drivers, and arguing that drivers were performing services to passengers, and not to Uber. It also argued that the contractor provisions were designed only for cases of true “sham contracting”, where a contractor is really an employee in disguise.
After losing in NSW’s top court, Uber made a last-ditch appeal to the High Court, which was heard in March this year.
On Wednesday, six of the seven High Court judges found that the “contractor provisions” could apply to the “gig economy”, even though they were enacted decades before ride-sharing and other gig-based business models were invented.
The provisions were “always speaking in the present to participants in the gig economy”, Chief Justice Stephen Gageler ruled.
The majority also found that drivers provide “driving services” to Uber directly, under a standard contract. The court concluded that Uber has “substantial control” over how drivers work – for example, it sets minimum standards, and can block drivers from its app – and also controls the fares it remits to drivers, making it more than a mere “payment collector”.
Mimi Zou, a UNSW professor and barrister who specialises in tax, said the judgment was “likely to affect other intermediaries operating under comparable legislation and contractual arrangements”.
“However, the decision did not decide that Uber drivers are employees generally or automatically establish entitlements under labour laws.”