High Court confirms Uber liable for $81 million in payroll tax

In a long-awaited decision, the High Court of Australia has dismissed Uber's appeal (Uber Australia Pty Ltd v Chief Commissioner of State Revenue [2026] HCA 40). It upheld payroll tax assessments (of approximately $81 million) on fares remitted to its drivers for the 2015 to 2020 financial years.

The result affirms the decision of the NSW Court of Appeal, but on a narrower basis, as discussed below.

The case concerned the "contractor provisions" in Division 7 of Part 3 of the Payroll Tax Act 2007 (NSW), which extend payroll tax beyond traditional employment relationships to some contractors. Most other Australian states and territories have similar provisions.

The Court's findings

Uber raised three grounds of appeal:

1. the driving services were not supplied to Uber, or "under" the Driver Contract;

2. the driving services were ancillary to the use of the drivers' cars; and

3. the remitted fares were not amounts paid or payable by Uber for or in relation to the performance of work.

The majority rejected each ground, summarised as follows:

1. The driving services were supplied to Uber "under" the Driver Contract

This ground raised two distinct questions: first, what does "a contract under which" mean in section 32(1); and second, whether the driving services were "supplied to" Uber as well as to riders, or only to riders.

(a) The meaning of "a contract under which"

The majority held that the phrase directs attention to the source of the obligation. The contract must create, or be the authority for, one of the obligations listed in section 32(1) (at [60]).

This is narrower than the Court of Appeal's approach. The Court of Appeal had said services can be supplied "under" a contract if the contract:

• is the source of the obligation to supply them;

• refers to, and governs or controls, their supply; or

• gives a right to be paid for them.

Gageler CJ observed that "under" is a relational term. Courts should go no further than necessary to apply such a term in a particular case (at [7]). His Honour therefore applied only the narrowest meaning, which Uber did not dispute (at [8]). The majority likewise did not decide the outer bounds of section 32(1)(b) (at [76]). Applying that construction, it did not matter that the drivers had no obligation to accept any trip, but once the driver picked up a rider, the Driver Contract required them to transport the rider directly to their destination, without unauthorised interruptions or stops. The majority likened drivers to casual employees. They have no obligation to accept work, but the obligations apply once work begins (at [72]). For businesses, this means that a contract that imposes obligations once work begins can be enough to be captured by these provisions.

(b) Whether the driving services were supplied to Uber

The majority held that the driving services were supplied to Uber, as well as to riders (at [68]).

Significantly for businesses, the majority accepted that a financial benefit for Uber was not enough on its own (at [69]). The majority gave a simple illustration: a shopkeeper may benefit from a bus stopping on its regular route outside the store, but the bus is not delivering services to the shopkeeper. What made the difference according to the plurality was the driver's contractual obligation to Uber, and the Court finding that Uber had substantial control over how they performed the work (at [70]).

2. The driving services were not "ancillary" to the use of the drivers' cars

Uber argued that the exclusion in section 32(2)(a) applied, because the driving services were ancillary to the use of the drivers' own vehicles. The High Court disagreed.

The majority referred to "ancillary" having its ordinary meaning of "subsidiary, incidental, accessory, auxiliary" (at [79]). They held that exclusion is aimed at contracts whose primary object is the use of goods. The primary object of the Driver Contract was the supply of driving services, not the use of a car (at [80]).

Gageler CJ stated that, for the exclusion to apply, the use of the property must be of greater contractual significance than the performance of the work (at [13]).

3. The remitted fares were "paid or payable … for or in relation to the performance of work"

Uber argued that it merely collected fares as the drivers' "limited payment collection agent", so it did not pay the remitted amounts for work. That argument succeeded before the primary judge, Hammerschlag CJ in Eq, but was rejected by the Court of Appeal and now by the High Court.

The majority described section 35 as a deeming provision that creates its own concept of "wages". Ordinary expectations of what constitutes wages were said to be of limited relevance (at [85]). The phrase "for or in relation to the performance of work" requires a connection between the payment and the work. That connection was present because the more driving services a driver provides, the more Uber remits to them (at [86]).

Uber did not argue that it held the fares on trust for drivers. Labels used in the contract were relevant but not decisive. Uber's right to adjust or cancel fares was considered to be inconsistent with drivers being entitled to fares when Uber received them (at [88]). The majority therefore distinguished the earlier decisions in Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40 and Commissioner of State Revenue v The Optical Superstore (2019) 110 ATR 651.

For similar reasons, the majority found Latham CJ's observations in Mutual Acceptance Co Ltd v Federal Commissioner of Taxation (1944) 69 CLR 389 "inapposite" (at [89]-[90]). Uber was found to have controlled the fares before remitting them, allowing it to deduct its service fee, or change or cancel the fare entirely. Additionally, when a driver receives the remitted amount, they have complete disposition and control of it.

The dissent of Steward J

Steward J dissented, allowing the appeal. His Honour characterised Division 7 as an anti-avoidance regime aimed at arrangements that disguise the "emoluments of employment" (at [96], [100]). On that view, its broad words should be read in light of payroll tax's function as a tax on wages.

His Honour did not accept that any clause in the Driver Contract obliged drivers to supply services to Uber. In his view, drivers supplied transport to riders under contracts implied between them, and Uber benefited from those supplies without receiving them. He also noted there was no suggestion that the Driver Contract was a form of disguised employment (at [135]).

On section 35, Steward J held that it the "amounts paid or payable by an employer" must refer to the payments or amounts over which the employer has complete domain. Uber collected the fares only as the drivers' limited payment collection agent, so it did not have complete control of them (at [139]-[140]). His Honour found it unnecessary to decide whether the exclusion in section 32(2)(a) applied (at [147]). There must be a payment made by the deemed employer for performance of work by the deemed employee under the “relevant contract”.

Implications for taxpayers and key takeaways

The decision is relevant to matters involving contractor provisions generally, and particularly to digital platform operators. Gageler CJ observed that the provisions, first introduced in the 1980s, are "always speaking in the present" (at [2]). The majority accepted that Parliament was unlikely to have foreseen the gig economy but found that the extrinsic materials supported its conclusion (at [77]).

The Court did not set the outer limits of the provisions. We expect revenue offices to read the decision broadly, including for marketplaces that list or match contractors. Those platforms will need to show that their contractors owe them no obligations about how the work is done. It is important to note that in our view the decision can apply to various other industries and requires careful examination of contracts used by those businesses going forward.

Businesses that engage contractors, including through digital platforms or on a collect-and-remit basis, should:

• review their arrangements for obligations owed to the business, service standards, pricing controls and payment terms;

• consider whether an exclusion applies in each financial year, and keep records to support it; and

• engage early with the revenue office if it makes enquiries or a risk is identified, to limit penalty and interest exposure.

The NSW Parliamentary inquiry into the contractor and employment agent provisions is still underway. Any recommendations for legislative reform, which could change the position for taxpayers following this decision, will be closely watched.