In August 2025, the New South Wales Court of Appeal ruled that Uber Australia must pay $81 million in payroll taxes on payments made to its drivers, rejecting Uber’s claim that it was merely a “payment collection agent.”
Uber may seek to appeal the decision to the High Court, and the Supreme Court’s interpretation of Uber’s contracts and payment structure has significant implications for the classification of payments as wages or service fees.
This case could set a precedent for businesses hiring freelancers or contractors, as it establishes the possibility of treating gig workers as employees for tax purposes. This ruling follows the Fair Work Commission’s December 2024 decision, which recognised that certain gig workers meet the criteria of employees and are therefore entitled to minimum wage, leave, and other benefits. (See our previous article on this Fair Work ruling.)
Together, these decisions signal a significant shift toward greater accountability for both gig economy platforms and businesses that directly engage contractors in Australia. Companies that hire contractors directly—or engage freelancers through third-party platforms—may now face increased scrutiny and compliance obligations under labor and tax laws.
.On top of existing data security and retention issues, this means mounting risks for Australian businesses who engage offshore workers directly.
What Happened with Uber?
Uber argued that it wasn’t the employer of its drivers—it just facilitated payments between riders and drivers. At first instance, the primary judge initially accepted Uber’s argument, but the Court of Appeal found that the primary judge erred in interpreting the relevant sections of the Payroll Tax Act.
The decision of the primary judge at first instance was therefore overturned on appeal. The Court of Appeal ruled that Uber’s payments to drivers were “for or in relation to the performance of work,” making Uber the employer under payroll tax laws. The Court dismissed Uber’s argument that the driving service was secondary to the use of the vehicle, emphasizing that the drivers’ work was central to Uber’s business model.
Why This Matters to You
If you hire offshore workers directly, or as freelancers through gig economy platforms—this ruling suggests you could be on the hook for payroll taxes and other employment obligations, even if payments are processed by a third party.
Payroll tax may apply to payments made to contractors if certain conditions are met. Specifically, this happens if the contractor mainly works for one client throughout most of the financial year, or if they don’t regularly offer their services to the general public. These rules apply whether the contractor works as an individual (sole trader) or through a business structure like a company.
Many businesses assume platforms act solely as payment agents, but the Court made it clear: substance trumps form. If the worker is performing services under your direction or control, those payments could be classified as taxable wages.
Examples of Potential Risks for Independent Contractors
- A marketing agency hiring freelance designers via a platform but controlling their schedules and workflows.
- A small business managing virtual assistants and paying them through a freelancer platform.
- Companies hiring accountants through outsourcing companies without doing due diligence on the correct employment status and fulfilment of tax and regulatory requirements
- Professionals like mortgage brokers or financial planners paying through intermediaries.
Broader Risks Beyond Payroll Tax Purposes
When viewed alongside the Fair Work decision on extra territorial contractors, misclassifying freelancers or contractors could lead to:
- Claims for unpaid wages, superannuation, or leave entitlements.
- Legal penalties and reputational damage.
- Audits and retrospective tax assessments as governments scrutinize gig economy arrangements.
Under Australian law, the distinction between employees and contractors depends on factors such as who controls how the work is performed. Amounts paid to workers may be classified as wages paid if they perform work or provide services under the employer’s direction, which can result in additional payroll tax liabilities.
What You Should Do Now
- Assess your freelancer risk: Understand if your business is exposed to risks by hiring offshore contractors directly, through a freelancer platform, or an employment agent who is not paying tax and benefits as employees.
- Consult Experts: Seek advice from tax and legal professionals.
- Improve Record-Keeping: Ensure documentation supports any claims that they are independent contractors.
- Consider Alternative Models: Explore options like Virtual Staffing, Business Process Outsourcing (BPO) to better manage legal and tax obligations.
Non-compliance could cost you dearly—so it’s better to act now than face unexpected liabilities later.
Need help navigating these risks? Cloudstaff offers expert consultations to ensure your freelancer hiring practices are compliant and cost-effective. Feel free to get in touch.