Uber must pay about A$81 million in payroll tax to the New South Wales revenue office after Australia's High Court dismissed the company's appeal in full on Wednesday.
The six assessments cover fares paid to Uber drivers between the 2015 and 2020 financial years. The company was first handed the bill in 2021, beat the tax office in the New South Wales Supreme Court, and then lost in the Court of Appeal last year.
Uber had argued that it was merely a payment collection agent, passing the fare to the driver after deducting its service fees, and that it provided "mere administrative payment arrangements" that should not be captured by payroll tax rules. It also argued that its drivers did not provide their driving services directly to Uber, and that there was no connection between the fares Uber paid and the drivers' work performance.
The court, by majority, found otherwise. It declared that Uber's drivers were employed under contracts and that the fares they received were deemed to be wages for the purposes of payroll tax legislation. Uber will also pay the costs of the New South Wales Chief Commissioner of State Revenue.
Chief Justice Stephen Gageler said there was a direct relationship between a driver's performance and the fares Uber paid for that work. He noted that contractor provisions had recently been re-enacted in New South Wales and Victorian tax legislation, and were "speaking in the present" to the emerging gig economy.
In a joint judgment, Justices Michelle Gordon, James Edelman, Jacqueline Gleeson, Jayne Jagot and Robert Beech-Jones agreed with him, adding that the contractor provisions were intended by parliament as one measure designed to "catch schemes designed to avoid liability for payroll tax".
"Drivers clearly 'supply' a service to Uber by doing something that is necessary for Uber to derive service fees and to continue its business," they wrote. "The remitted amounts from Uber to a driver are paid or payable for or in relation to the performance of work (driving services) relating to a relevant contract ... and are therefore deemed to be wages."
The decision leaves the door open for other states to pursue similar readings of provisions written to stop the traditional employer-employee relationship being replaced by so-called contractors. The Transport Workers' Union called the ruling a "critical reality check".
Uber said it respected the decision but still did not believe digital marketplaces should have to pay payroll tax. The company warned that the ruling "could have significant unintended consequences beyond rideshare, affecting intermediary business models across the economy, including mortgage brokers, service-based marketplaces, medical practices and other healthcare services", and added: "It sets an alarming precedent at a time when businesses across Australia already face significant red tape and increasing cost pressures."
The operative word in all of this is "deemed". The fares were not found to be wages. They were found to be deemed to be wages, for the purposes of one Act, in one state, across six assessments.
This newspaper regards that as a considerable advance in precision. A fare remitted to a driver in Parramatta is now a wage when New South Wales is looking at it and an administrative payment arrangement the rest of the time. The money does not change. Only the jurisdiction observing it does.
The consequences are therefore tidier than Uber fears. Because the deeming operates for payroll tax purposes, the same transaction can be a wage to the Chief Commissioner of State Revenue and a fare to everybody else, including the driver, who goes on receiving it in the second capacity.
Uber's own list of affected industries can be read the same way. Mortgage brokers, service-based marketplaces and medical practices are not at risk of their payments becoming wages. They are at risk of their payments becoming wages in a defined, bounded and entirely reversible sense whenever a revenue office is in the room.
The Department of Unnecessary Research notes that nothing in the judgment requires the deeming to stop at a state border, and has written to the Chief Commissioner for guidance on the obvious follow-up. A fare earned in Sydney and spent in Melbourne must cease to be a wage at some point on the way, and the Department would like to know whether that point is Albury.