Uber Australia Pty Ltd v Chief Commissioner of State Revenue

The Plaintiff (Uber) applies to this Court under s 97 of the Taxation Administration Act 1996 (NSW) [1] to review a decision of the Defendant (the Chief Commissioner) disallowing Uber’s objection to six payroll tax assessments totalling $81,515,923 issued by the Chief Commissioner for financial years 2015 to 2020 inclusive (the Assessments), pursuant to the provisions of the Payroll Tax Act 2007 (NSW) (the Act). Uber also seeks to have remitted the premium component of interest imposed on it by the Chief Commissioner.

References below to sections are, unless otherwise stated or the context indicates differently, to sections of the Act.

Sometimes, Uber is described as a rideshare system. It puts riders who wish to be transported by motor vehicle (riders), in contact with drivers offering the service of picking them up and driving them to their destination (drivers). The connection is achieved by way of Uber’s software applications (apps) which include a “Driver App” and a “Rider App”.

A driver may be an individual operating on his or her own, or a person working for a person carrying on the business of providing transport services, that is, in essence, a taxi company (partners).

The Act imposes payroll tax on all taxable wages paid or payable by an employer. Taxable wages are those paid or payable by an employer for or in relation to services performed by an employee wholly in this jurisdiction.

Division 7 of the Act (comprising ss 31-36) headed ‘Contractor provisions’, expands the scope of liability to pay payroll tax by capturing payments made by a person who, during a financial year, supplies services to another person under a contract (relevant contract) under which the first person (designated person) has supplied to the designated person the services of persons for or in relation to the performance of work.

The pivotal section for present purposes is s 32(1)(b), which provides:

Under s 31, ‘contract’ includes an agreement, arrangement or undertaking, whether formal or informal and whether express or implied.

Sections 32(2)(a), (b)(iii), (b)(iv) and (c)(i) (the exclusions), relevantly, exclude from the definition of ‘relevant contract’ a contract under which the designated person:

Under s 32(2B), the exclusions do not apply to a contract under which any additional services or work of a kind not covered by any relevant exclusions are supplied or performed under the contract.

Under s 35(1), amounts paid or payable by an employer during a financial year for or in relation to the performance of work relating to a relevant contract are taken to be wages paid or payable.

On 24 April 2021, Uber objected to the Assessments. On 31 April 2021, the Chief Commissioner disallowed the objection.

The Chief Commissioner assessed Uber to payroll tax on the basis that the majority of amounts collected on behalf of drivers by Uber from riders and remitted to the drivers is taken to be wages, as amounts paid or payable for or in relation to the performance of work relating to a relevant contract.

The Chief Commissioner also imposed premium interest on Uber. Uber seeks that it be remitted.

The Chief Commissioner’s position, over the life of this controversy, on the basis of Uber’s liability for payroll tax has, to the manifest frustration of Uber, shifted significantly a number of times. Ultimately, there is nothing impermissible about this shift because the current hearing is a hearing de novo and is not limited to the materials before the Chief Commissioner. The parties are not bound by the grounds of objection to the Chief Commissioner’s decision, nor by the reasons for decision on the objection: Milstern Nominees Pty Ltd v Chief Commissioner of State Revenue (2015) 89 NSWLR 43 at [4] per White J (as his Honour then was); Southern Cross Group Services Pty Ltd v Chief Commissioner of State Revenue (2019) 110 ATR 16; [2019] NSWSC 666 at [2] per Ward CJ in Eq (as her Honour then was).

Uber is, however, entitled to proceed on the basis that it is not incumbent upon it to do more than successfully disprove, on the balance of probabilities, the basis for assessment advanced by the Chief Commissioner (that is, not some other basis) or, if only questions of law are involved (as is the case here), demonstrate that there is not a legal basis for the assessment: Bailey v Commissioner of Taxation (1977) 136 CLR 214 at 219-221; Southern Cross at [2] per Ward CJ in Eq (as her Honour then was); Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue (2019) 109 ATR 879; [2019] NSWSC 657 at [7] per Ward CJ in Eq (as her Honour then was).

What the changes perhaps reveal are the conceptual complexities of applying Division 7 to a system like Uber’s, the likes of which did not remotely exist when the Division was introduced. It is worthy of observation that in the Second Reading Speech when Division 7 was introduced, it was said to be “to deal with the practice of using contractors who provide services on a similar basis to ordinary employees but who are regarded at law as independent contractors”, as a basis to avoid, amongst others, charges and taxes such as payroll tax. There is no suggestion in this case that the Uber system is structured to avoid tax obligations.

The hearing took place over four days. In addition to extensive oral argument from both sides, Uber produced 91 pages of closing written submissions and 19 pages of further submissions in reply and the Chief Commissioner produced 79 pages of written submissions and a number of other writings. There were two additional appearances caused by me raising an issue to which reference is made below. I have had regard to all of the arguments but will not restate them.

First, Uber contends that its contracts with drivers are not relevant contracts under s 32(1)(b) because “transportation services” were provided by drivers, not to Uber, but to riders, and were provided, not under the drivers’ contract with Uber, but under the drivers’ contract with the rider.

Second, Uber contends that its arrangements with drivers and partners are excluded from the definition of relevant contract under one or more of the exclusions in s 32(2) (the exclusions) in that:

Third, it contends that amounts paid by it to drivers were not paid for or in relation to the performance of work under that contract, and thus are not taken under s 35(1) to be wages paid or payable by it.

In response to Uber’s contentions that its arrangements fall within one or more of the exclusions, the Chief Commissioner puts that, under s 32(2B), the exclusions do not apply because under the contracts between Uber and drivers or partners additional services or work of a kind not covered by any of the relevant exclusions are supplied or performed.

The Chief Commissioner now concedes that the exclusion in ss 32(2)(b)(iv) is engaged with respect to some (but not all) drivers and partners. But there is a dispute as to what are the criteria to be applied when determining whether a particular driver ordinarily performed taxi or hire car transport services to the public generally.

The Chief Commissioner now also concedes that s 32(2)(c)(i) applies where a partner supplied two or more drivers. The consequence of this is that some adjustment to the Assessments would be required, come what may.

For the reasons which follow, I have concluded that:

The effect of the finding in (4) above is that Uber succeeds, and the Assessments must be revoked. If s 32(2B) did not operate, the effect of the finding in (3) above would have been that the Assessments would be revoked in part only.

The following summary of how Uber works is derived from a combination of the written submissions, evidence given and documents tendered. It reflects the position during the period to which the Assessments relate (Relevant Period).

The facts are not in dispute.

The term ‘Uber’ has now entered the English lexicon meaning, depending on the context, the company or companies which trade under that name, or the car itself which is used to take a trip. The term ‘Uber driver’ has also entered the lexicon, denoting the driver of an Uber car. Uber takes its name from Uber B.V., a private limited liability company incorporated under the laws of the Netherlands, with its registered seat in Amsterdam. The plaintiff is a wholly owned subsidiary incorporated in Australia.

Uber has developed two software applications or “apps” – the ‘Driver App’ (used by drivers) and the ‘Rider App’ (used by riders). The apps are platforms which enable drivers and riders to connect, which in turn enables drivers to be available to provide transport to riders.

The apps incorporate a system which allows riders to rate the drivers and drivers to rate the riders (and Uber itself gets the information). At the end of a trip, the driver is prompted to rate the rider.

If a rider makes a trip request through the Rider App, it is passed on to a driver (usually, but not always, the nearest one) via the Driver App.

The apps use a process of “batched matching” to minimise overall wait times for riders (as opposed to a single rider). The driver is shown the rider’s rating, the distance and estimated time to the pick-up point, and any applicable “surge” pricing multiplier. Surge pricing is an algorithmic tool designed to increase marketplace reliability when demand significantly outstrips supply.

Uber allocates an identification and password key allowing the driver to access and use the Driver App.

A driver can accept, ignore or reject a request. If the driver ignores or rejects it, it is presented to another available driver, if there is one.

If a driver accepts the request, the driver is given the rider’s name and location, and the rider is shown the driver’s location, estimated time of arrival, the driver’s first name, vehicle model and registration number.

Before the driver gets to the pickup location, either party can cancel the trip. A rider who does so might have to pay a cancellation fee.

Riders input their destination in the Rider App when requesting a trip. The driver is only given the destination once he or she picks up the rider and commences the trip. The driver is not given the estimated or actual fare or provided with the actual pickup location or the rider’s intended destination, so as to avoid “cherry-picking”.

At a journey’s end, the rider automatically pays the fare electronically. The amount of the fare is a function of time and distance plus a base fare (subject to a minimum fare).

Uber has a support team which can authorise, if requested, a decrease in the fare where, for example, the driver took a route different to that suggested by the Driver App which turned out to be inefficient or involve extra tolls. In limited circumstances, the driver can ask for an additional amount to be charged to a rider, for example, for cleaning fees. Uber retains an absolute discretion as to the amount ultimately charged and unilaterally to adjust the fare payable for a particular trip. However, this rarely (if ever) occurs.

Uber deducts its service fee from the rider’s payment and pays the balance to the driver. The service fee is calculated by reference to the time and distance component of the fare (generally 20-25% of the fare).

In 2017, booking fees were introduced. Drivers pass on these to riders.

Invoices are available to riders via the Rider App from Uber on behalf of the driver. Invoices identify the driver and include the driver’s Australian Business Number (ABN), but not Uber’s. It seems that invoices were issued only when asked for. Uber emails the rider a receipt which bears the Uber logo, thanks the rider for riding and notes the name of the driver.

Uber does not require drivers to be online at any particular time or for any minimum period of time. Drivers have discretion as to when to go “online” and for how long. There is a safety feature in the Driver App which takes drivers offline for eight hours if they have been online for 12 hours without a consecutive eight-hour break.

Drivers can be blocked from using the Driver App for breaching Uber’s community guidelines which deal, among others, with quality of service, cancellation rates, safety, discrimination and fraud.

Riders can be blocked from using the Rider App for breaching Uber’s community guidelines which, for riders, deals with matters such as rider behaviour, unwanted contact between riders and drivers or fellow riders, compliance with the law, discrimination and fraud.

At various times during the Relevant Period, different forms of written contract governed the relationship respectively between Uber and drivers who were individual operators [2] (Driver Contracts) and the relationship between Uber and partners [3] (Partner Contracts). Where it is not necessary to distinguish between the two, they will be referred to collectively as the Contracts.

Drivers and partners were required to agree to updated terms from time to time. These were variously described as Partner Terms, Transportation Provider Service Agreement and Services Agreement.

It is not (with one possible exception) [4] suggested that differences between the forms of contract are material to the present dispute.

The specific Uber entity which is party to the agreements is not always the same but nothing turns on this.

The majority of drivers were individual operators. The Uber service using standard cars is commonly referred to as UberX. There is also an Uber service which uses hire cars (called UberBlack) and, as well, drivers with a registered taxi licence can offer an Uber Taxi service. The latter two services have a minimal role to play in these proceedings and their only relevance is to the possible operation of one exclusion.

The following are specific relevant features of the provisions in almost all Driver Contracts and Partner Contracts. There are one or two exceptions but no provisions in the exceptions are inconsistent with the features now identified. The references in the next paragraph to clauses are, respectively, to 1 December 2017 versions of the Contracts.

The Contracts:

During the Relevant Period, Uber had an incentive program under which it paid money to drivers or partners who successfully referred potential new drivers to it. It published offers to drivers and partners in different ways, including by in-app offers and promotional emails, but it is not in dispute that the program operated and that drivers were paid separately for successful referrals. At one stage, drivers would be paid 10% of their referrals’ gross fares during their first 30 days on the road. Different rates applied to UberBlack and UberTaxi.

There is some debate as to whether the incentive scheme operated under Supplemental Terms of the Contracts or was standalone. Little if anything turns on this, however.

The Partner Contracts impose on the partner an obligation to procure the driver to comply with the Driver Contract and give representations concerning the qualifications and fitness of the driver and the state of their vehicle.

During the Relevant Period, there were six forms of written contract which respectively governed the relationship between Uber and riders (Rider Contracts). [5]

Once again, the differences between the versions are not material to the present controversy. The references in the next paragraph to clauses are to the 10 June 2020 version of the Rider Contracts.

The Rider Contracts:

The preamble to the Act describes it, relevantly, as an Act to provide for a tax on employers in respect of certain wages.

Under s 6, payroll tax is imposed on all taxable wages.

Under s 7, an employer, by whom taxable wages are paid or payable, is liable to pay payroll tax on the wages.

Section 11 provides, relevantly, that wages are taxable if they were paid or payable by an employer for or in relation to services performed by an employee wholly in this jurisdiction.

Section 13(1)(e) provides that for the purposes of the Act wages means wages, remuneration, salary, commission, bonuses or allowances paid or payable to an employee, including an amount that is included or as taken to be wages by any other provision of this Act.

As mentioned earlier, Division 7 is entitled ‘Contractor provisions’. The following sections in that Division are pertinent.

At first instance, in Downer EDI Engineering Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 743 at [101]-[110], Payne JA helpfully set out the legislative history of Division 7.

Whether on the facts and in the circumstances of this case s 32(1)(b) is engaged or not is a question of the statutory construction of that provision.

The answer depends upon whether, upon that proper construction, each of the following questions is answered in the affirmative (observing that where I refer to a contract, I am referring to a contract as defined in s 31):

The approach which the Court must take to construing the provisions of the Act is that laid down in Corporate Affairs Commission (NSW) v Yuill (1991) 172 CLR 319 at 346, where McHugh J cited, with approval, Lord Radcliffe's statement in Attorney-General (Canada) v Hallet & Carey Ltd [1952] AC 427, 449 that "the paramount rule remains that every statute is to be expounded according to its manifest or expressed intention." His Honour went on to say that:

The answer to this question requires identification of services supplied to Uber and the existence of a relationship between those services and the performance of work which results in those services being “for or in relation to” that work.

The term ‘services’ is of wide import (even leaving aside the extended definition in s 31): see IW v City of Perth (1997) 191 CLR 1 at 11. The Macquarie Dictionary, 4th ed (2006) defines it, relevantly, to include “an act of helpful activity”.

The Chief Commissioner appropriately abandoned the untenable contention that partners provided a service to Uber by procuring that drivers who worked for them agreed to and adhered to the Partner Contract or an addendum to it.

The Chief Commissioner argued that the following (individually or collectively) were services supplied by drivers and partners to Uber:

The Chief Commissioner argued that these activities are services to Uber because they assist and confer benefits on Uber including the generation of service fees and the increased attractiveness of the Uber platform to riders by making it more efficient, and therefore generating an economic benefit for Uber.

He argued that rating riders is of significant value to Uber because it contributes, amongst others, to the enhancement of safety by reducing road safety incidents and interpersonal conflict between drivers and unreliable or uncivil riders. He says that the driver has no practical option but to give a rating. He sought to make the point that, given the 90-day exclusion in s 32(2)(b)(iii) applies, each driver covered by the assessment must have given a rating on at least 90 days.

The Chief Commissioner accepts that drivers provided a transport service for riders, but says that drivers also did so for Uber.

Uber accepts that drivers supplied the service of transporting riders. But it says that they did not provide that service to it, but rather, that they supplied it to riders. Uber characterises its system as a marketplace through which drivers and riders can identify and contract with one another. It is apt to observe that both parties agree that the principal object of the Contracts was to make the apps available to drivers or partners. The Court was informed that the Chief Commissioner does not contend that payroll tax is payable on amounts paid to drivers or partners for rating or under the referral scheme if the amounts otherwise paid to drivers or partners (for their driving) are not assessable.

Uber takes issue with the contention that giving feedback to Uber about riders can aptly be called a service. However, it says that, if it can, it is so minimal and insignificant in the context of the operation of the Uber system that the legislature could not have intended it to be a service captured by the provisions of the Act, so as to give rise to a payroll tax obligation on amounts paid for or in relation to it. This, it argues, is because it gives no separate consideration or reward for it.

Uber agreed that the activity of referring people for the purpose of them becoming drivers can constitute a service to it by drivers or partners.

Section 32(1)(b) is infelicitously drafted. The words “the designated person – has supplied to the designated person the services of persons...” are, literally construed, capable of meaning that the designated person has supplied services to itself, an absurdity. Additionally, the concept, if there is one, of supplying the services of persons in relation to the performance of work is not without its difficulties. It seems to embrace the notion that the services of one person are supplied in relation to the performance of work by someone else. There is also difficulty in distinguishing between what is meant by work as opposed to what is meant by supplying services for or in relation to work.

Nevertheless, in the Explanatory Note to the Payroll Tax Bill 2007 (NSW), the effect of the provision is said to apply where a person is supplied with persons to perform work. In Halsbury’s Laws of Australia, 405 – Taxation and Revenue, at par 39035 (online at 18 October 2021), the learned authors say that it applies where a person is supplied with the services of a person for, or in relation to, the performance of work. Authorities in this area have apparently glossed over the difficulties and have read sub-s (b) as if the word “had” appears after the word “has”. However, the shortcomings of the sections and the possible ramifications for their operation were not raised as issues in the hearing and accordingly can be put aside.

It can be seen from the aforegoing that the basis for the Assessment finally put forward by the Chief Commissioner (and challenged by Uber) was to identify three separate (but related) activities, namely, driving, rating and referring, either on their own or in combination, with a view to establishing that they are services of persons for or in relation to the performance of work within ss 32(1)(b) and 35(1). I will refer to this as the trichotomy analysis. Uber’s challenge adopted the trichotomy analysis and indeed sought to invoke it in its submission that s 32(2)(a) applies.

On the third day of the hearing, I expressed doubt that the trichotomy analysis is sound in characterising the legal relationship between Uber, drivers and partners for the purpose of divining the application (or not) of the Act to that relationship. I raised with the parties the idea that the trichotomy analysis may be artificial and that the activities of the drivers (or for that matter, Uber itself) should perhaps be seen compendiously and as a whole (I shall call this the holistic approach). On the holistic approach, for example, if what the drivers do is to supply services to Uber, it is not because some part of what they do might constitute a service, but because what they do as a whole, does. Rating riders takes place in the context of the operation of the Contracts as a whole, and its entire content and value is derived from that context. The holistic approach, it seemed to me, accords with what Leeming JA had in mind in Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40 which was cited to the Court, when his Honour said at [45]:

Uber’s reaction to the Court approaching the matter on the holistic analysis was stridently that the Court could not do so mero motu or against Uber’s wishes, and that doing so would involve procedural unfairness to Uber. It put that if the Court was proposing to adopt it, it would require an opportunity to put on more evidence and make detailed submissions. The Chief Commissioner’s stance was appropriately agnostic. He did not embrace the holistic analysis as a possible basis for the Assessments and did not seek for the Court to implement it, but accepted that the Court could (after giving the parties a further opportunity to be heard) determine the matter on the basis of it.

After hearing submissions on whether the Court could or should implement the holistic analysis, I concluded that in the face of Uber’s opposition, it being dominus litis on the review, and the Chief Commissioner’s agnosticism, I should put it to one side, even though it might have been that, on at least one significant issue, Uber’s position could have been advantaged by adopting it. I also formed the conclusion that, given both parties adopted the trichotomy analysis, it would not be appropriate for the Court not to adopt it, even if, as I do, I have significant doubt as to its soundness.

I will examine the matter using the trichotomy analysis.

For the reasons advanced by the Chief Commissioner as to value and benefits of the activity, I do not consider that rating is so insignificant as to be aptly described as de minimis, and for that reason, not caught by Division 7.

I find that each of driving, rating and referring are services.

Division 2 (comprising ss 10, 11, 11A, 11B and 11C) is headed ‘Taxable wages’. It delineates the wages which are taxable. Whether they are taxable or not depends, relevantly, on them being paid or payable by an employer for or in relation to services performed by an employee (s 11(1)(a)). The term ‘work’ is not used in that Division.

By contrast, Division 7, in various places, refers to both ‘services’ and to ‘work’, indicating that the two do not have precisely the same meaning. The concept of ‘work’ may be thought to be narrower than ‘services’ but there is no bright line distinction between the two.

In Accident Compensation Commission v Odco Pty Ltd (1990) 95 ALR 641, the High Court considered provisions in the Victorian Accident Compensation Act 1985 (Vic), some of which were in the same terms as provisions of the Act now under consideration, including sections which used the expression “services for or in relation to the performance of work”. The Full Court (Mason CJ, Brennan, Dawson, Toohey and McHugh JJ) said at 650-651:

Whilst the services need not be wholly distinct from the work which s 32(1)(b) has in mind, applying orthodox canons of construction, it cannot be assumed that the legislature intended different words to have exactly the same meaning and that no distinction is to be drawn between the two concepts: see Commissioner of Taxes (Vic) v Lennon (1921) 29 CLR 579, 590 (Higgins J); King v Jones (1972) 128 CLR 221, 266 (Gibbs J).

In Smith’s Snackfood Company Ltd v Chief Commissioner of State Revenue (NSW) (2013) 97 ATR 904; [2013] NSWCA 470 at [32], Gleeson JA adopted the formulation “work-related”.

The determination of whether services are work-related requires identification of the services and the work, and an evaluation of whether there is a relationship between them of the type contemplated by the section.

Much judicial energy has been expended on the meaning of the words “in relation to”. What, however, is clear is that the phrase is ambulatory, and its field of operation depends on the context in which it is used.

In Travelex Ltd v Federal Commissioner of Taxation (2010) 241 CLR 510 at [25] and [90], the High Court said:

In Re Khazaal (2012) 246 CLR 601 at [31], the High Court said:

In Technical Products Pty Ltd v State Government Insurance Office (1989) 167 CLR 45 at 47, the phrase was described as having a chameleon-like quality.

In Workers Compensation Board of Queensland v Technical Products Pty Ltd (1988) 165 CLR 642 at 651, the High Court described an approach that the term “in respect of” (which is often equated with “in relation to”) has the widest possible meaning of any expression intended to convey some connection or relation between the two subject matters to which the words refer, as “going somewhat too far”.

Thus, it would be a mistake to proceed on the footing that any relationship of any kind whatsoever will suffice.

Driving passengers around is undoubtedly work.

Although (on the ordinary grammatical meaning of the term) rating and referring are services, I have some doubt that they can fairly be described as work given the minimal exertion involved. It is not necessary to decide this.

By driving, the drivers make the system work. Their participation in the system by way of rating and referring alone is sufficiently connected to the driving to make those services “in relation to” work. If driving itself is a service, it is one which is in relation to the performance of work.

This question requires identification of terms of a contract between Uber on the one hand, and drivers and partners on the other, and the existence of a sufficient connection between those terms and the services, to make them services supplied under that contract.

The Chief Commissioner argued that the relevant contracts are a combination of:

I interpolate that, in my opinion, the referral scheme comes within cl 13 but not within cl 31. The material in evidence which describes how the referral scheme operated does not relate to features and functionality of the system. Additionally, there is no evidence that the drivers were ‘presented’ with that material as Supplemental Terms.

The meaning of the phrase “under which” (which appears in ss 32(1) and 32(2)) has been the subject of judicial consideration.

In Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520 at [49], the High Court (Gleeson CJ, Gaudron, McHugh and Hayne JJ) said that the contract “under” which something occurs is to be identified by determining whether it is “properly to be seen as the source of the obligation” to do that thing. I take this to include the corollary that, if what is done is the exercise of a right, the determination is whether the contract is properly to be seen as the source of that right. I take this to comprehend that whether an identified thing has been done under an identified contract is a corresponding equation with the same integers: see Commissioner of Taxation v Energy Resources of Australia Ltd (1994) 54 FCR 25 at 53 per Gummow J.

This approach was followed, on my reading of it, by the Court of Appeal in Chief Commissioner of State Revenue v Downer EDI Engineering Pty Ltd (2020) 103 NSWLR 772; [2020] NSWCA 126 at [122]-[123] where Bathurst CJ, in delivering the leading judgment, said:

At least two appellate authorities have expressed the test differently and in a manner which might be viewed as wider than that stated in Sara Lee.

In Inghams Enterprises Pty Ltd v Hannigan (2020) 379 ALR 196 at [137], Meagher JA said:

His Honour’s approach of identifying the source of the underlying payment obligation accords with that taken in the High Court. However, his Honour identified an additional matter to which attention must be directed, namely, whether the agreement governs or controls its existence. If his Honour had in mind that it would suffice either if the contract was the source of the underlying obligation or if the agreement governed or controlled the existence of the obligation, the test posited is less strict than that applied by the High Court, because a contractual provision may no doubt govern or control the existence of an obligation without necessarily being its source. If, however, his Honour had in mind that both requirements had to be met, the test is stricter than that applied by the High Court because it requires not only that the agreement be the source of the obligation, but also that it governs or controls its existence.

In Smith’s Snackfood at [79]-[80], Gleeson JA said:

The articulation of the test as “required by” the contract is, it seems to me, in effect, equivalent to the High Court’s articulation of being the source of the obligation. However, “in accordance with” or “pursuant to” may not require the contract to be the source of the obligation concerned, and can therefore be read as imposing a wider or more easily satisfied test.

To the extent that the alternatively articulated tests differ from the High Court’s articulation, that of the High Court must prevail.

The Chief Commissioner, following the trichotomy analysis, put that the following considerations have the effect that the services provided by the driver to Uber were supplied under the Contracts:

Uber, also adopting the trichotomy analysis:

The Contracts give drivers and partners the right, if and when they drive, to use the Driver App. They have the right to use the Driver App even if they choose not to drive. The right to use it, and all the entitlements and benefits stemming from its use, including the opportunity to drive, or to decline to drive, for gain, have their source in the Contracts. The obligations upon them when they avail themselves of those opportunities are imposed by the Contracts. This meets the test laid down by the High Court. A fortiori it meets the alternatively articulated tests so far as they are wider than the High Court’s test.

Therefore, I conclude that the Contracts are ‘relevant contracts’ within the meaning of that term in s 32(1)(b).

I turn then to the exclusions.

For the exclusion in s 32(2)(a) to apply:

According to the authorities, the term ‘ancillary’:

These authorities allow two things to be ancillary to each other.

In this context, the Chief Commissioner submitted that a service is ancillary to the supply or use of goods where the primary or principal matter or object of the contract is the supply or use of the goods (not the supply of labour), and the services are ancillary to that object. In support of this, the Chief Commissioner relied on the Explanatory Memorandum to the equivalent to s 32(2)(a) introduced in Victoria in 1983:

In my view, this approach, which requires primacy to be attributed to the supply or use of the goods, does not accord with the approach taken in the appellate authorities referred to earlier, which bind me.

Once again, Uber’s and the Chief Commissioner’s arguments on this topic were framed on the trichotomy analysis.

As to driving, I do not consider that it can properly be described as a service ancillary to the use of the vehicle. Categorising driving as a service obscures the reality that driving, in that sense, means driving a car. There is no room for separating the two into elements, one of which is capable of being ancillary to the other.

However, rating a rider after they have been driven in a vehicle is undoubtedly a service ancillary to the use of that vehicle. It is bound up with that use. A driver cannot rate a rider if they have not used a vehicle.

Referring, on the other hand, is not ancillary to the use of any vehicle. The referred person may never drive.

The Chief Commissioner put that:

The thrust of this submission is that the onus lies upon Uber to prove, on the probabilities, that each car used by each driver for each trip is one in which the driver had a recognised property interest.

Uber put that no proprietary interest is required and that, in its context, “the property of” means goods the use of which are brought to the bargain by the supplier of the service, ie. the driver (not Uber). Uber put that it suffices for the driver to be in lawful possession of the vehicle and to be able to assert lawful possession against the designated person (ie. Uber).

I consider that the words “the property of” are not used in any technical legal sense or as a term of art. As with all other terms, it takes its meaning from the context in which it is used.

Schedule 4 of the Interpretation Act 1987 (NSW) contains the following definition of property:

In the phrase “which are the property of”, the word is plainly not used in the sense connoted by the statutory definition. The phrase in the section denotes the relationship of the person to property, in the section “the goods”, and not the thing in which the person has any legal or equitable estate.

The term ‘property’ has been described as ambiguous: Minister of State for the Army v Dalziel (1944) 68 CLR 261 at 276. It has also been described as the most comprehensive of all terms which can be used, in as much as it is indicative and descriptive, of every possible interest that a party can have: Jones v Skinner (1835) 5 LJ Ch 90.

It is used in this section to denote a relationship between the person supplying the services and the goods to which those services are ancillary. In that context and used in its common English language sense (see Queensbury Industrial Society v Pickles (1865) LR 1 Exch 1 at 4 per Bramwell B), I take it to mean the use of a car which is theirs to use, as opposed to the designated person’s.

I can discern no rational, economic or policy reason why the driver would have to establish a proprietary right in the vehicle as opposed to lawfully possessing it and using it to drive. Such a requirement would not serve the evident policy behind the section, that is, to exclude contracts where the use of goods (as opposed to the services) brought to the bargain by the supplier plays more than a de minimis role.

On this footing, the lawful use of the vehicle driven by the driver makes it “the property of” the driver for the purposes of the exclusion.

The Chief Commissioner did not contend that the drivers did not lawfully use the vehicles they drove. I am prepared to infer that they did.

The perhaps ironic consequence is that by treating rating as a service (contrary to Uber’s submission), Uber comes within s 32(2)(a).

The consequence of the finding that driving and referring are not ancillary to the use of the vehicle the property of the driver is that s 32(2B) applies to denude Uber of the benefit of this exclusion. In this context, the adoption of the holistic analysis might have come to Uber’s rescue. On that analysis, all of the services identified in the trichotomy analysis would have been viewed compendiously with everything else the driver does. The totality of those things needs a car and would be ancillary to its use. There might not have been any scope for the application of s 32(2B) because there would be no additional services.

Whether the exclusion in s 32(2)(b)(iii) applies depends, in relation to each driver, on whether the services (if any) provided by that driver were supplied for less than 90 days during the financial year.

The Chief Commissioner argued that services supplied for a period exceeding 90 days means services supplied on more than 90 single days (irrespective of the hours over which those services were supplied) in the financial year. In other words, if a driver supplied services of any kind in a day, that day is a day for the purpose of the calculation.

Uber argued, as I understood it, that working for a period of a day means working for that many hours notionally equivalent to those which would be worked by a full-time employee. Uber referred to the Explanatory Memorandum to the Pay-roll Tax (Amendment) Bill 1983 (Vic) which, with respect to the 90-day exclusion provision, said:

Uber argued that the most meaningful comparator for a “traditional contract of employment” is the Passenger Vehicle Transportation Award 2010 (Cth) cl 10.3(a) which provides that a full-time employee in the passenger vehicle transportation industry is an employee who is engaged to work an average of 38 hours per week, which is the equivalent of five 7.6-hour days.

Accordingly, argued Uber, if in the financial year the actual number of driving hours did not exceed 90 x 7.6, the 90-day threshold would not be reached.

I uphold the Chief Commissioner’s argument. It accords with the plain English meaning of s 32(2)(b)(iii). On the other hand, Uber’s argument is untenable, and I reject it. No foundation for it can be found within the words of the Act. The selection of 7.6 hour days is random and imports ambulatory operation.

Moreover, Uber’s approach is to equate the provision of services only with driving, whereas the services provided by drivers and partners are not properly to be equated only with driving.

Uber has not established that the exclusion in s 32(2)(b)(iii) applies.

Whether the exclusion in s 32(2)(b)(iv) applies depends on whether the services (if any) performed by the drivers are of the type ordinarily performed by that driver to the public generally.

Uber’s contention is that there are drivers who held taxi licences and hire car licences in the Relevant Period. Uber argued that the services supplied by drivers to Uber (which, for this purpose, Uber equated with driving for hire) are of the same kind provided to the public by taxi drivers and hire car drivers, and that the Court should infer that those drivers ordinarily performed services of that kind.

There was no evidence led by Uber as to the frequency of taxi or hire car driving by those drivers, to enable the Court to conclude that they ordinarily engaged in that activity. Uber accordingly failed to prove a fact necessary to bring it within the exclusion.

Whether the exclusion in s 32(2)(c)(i) applies depends on whether the services (if any) performed by the drivers are performed by two or more persons employed by, or who provide services for, the partner in the course of a business carried on by the partner.

As noted earlier, the Chief Commissioner conceded that this exclusion applies to some but not all of the drivers or partners, necessitating a variation to the Assessments in any event.

Section 32(2B) applies where, under the contract, additional services or work not covered by, relevantly, s 32(2)(a) and (b), are supplied or performed.

The Explanatory Memorandum to the State Tax Laws Amendment (Budget and Other Measures) Bill 2013 (Vic) which introduced sub-ss 32(2A) and (2B) into Victoria’s payroll tax legislation provides:

In the Explanatory Note to the State Revenue Legislation Further Amendment Bill 2014 (NSW) which inserted s 32(2B) into the Act, it provides:

The Chief Commissioner argued that where s 32(2B) refers to “additional services or work”, this can be services supplied or work performed by the designated person because the word “additional” is preceded by the word “any” and is therefore not restricted to services supplied or work performed by the person supplying services to the designated person.

I do not accept this submission. In my view, on the plain grammatical meaning of the word in its context, “additional” can only be additional to the services or work supplied or performed by that other person.

Additionally, the Explanatory Memorandum and Note above mentioned Smith’s Snackfood and the fact that the exemption expressly provided that a contract did not include one under which “the principal is supplied with services”. This reveals that Parliament intended the exclusion to operate with respect to services going only one way.

Because referring is not ancillary to the use of a car, it is an additional service. This enlivens s 32(2B).

Section 35(1) requires identification of a connection between the payments made by Uber the subject of the Assessments, and work done by drivers under the Contracts so as to make the payments “for or in relation to” that work.

Uber put that:

The Chief Commissioner put that there was a direct relationship between the payments made by Uber and the performance of work by drivers under the Contracts because Uber paid drivers for the work they performed that was permitted and regulated by the Contracts.

The words “in relation to” are no doubt very wide, but they must still be construed in the context in which they are to be found, and having regard to various rules of construction which Parliament is presumed to have intended to be used to ascertain the meaning of its legislation: see Yuill at 346.

One of those rules, noscitur a sociis, was referred to, and applied by, Spigelman CJ in Lend Lease Real Estate Investments Ltd v GPT RE Ltd [2006] NSWCA 207. At [30], the Chief Justice referred to the general principle of the law of interpretation that the meaning of a word can be gathered from its associated words, and that the linking of words indicates that they should be understood in the same sense: see too Deputy Commissioner v Dick (2007) 226 FLR 388.

The words “for” and “in relation to” are linked in sub-s (1) by the preposition “or”.

The ordinary English meaning of “for” in s 35(1) is number 6 in the Macquarie Dictionary, 4th ed (2006), namely, “in return for” or “in consideration of”. So read, Uber’s submission in relation to “for”, that the payment must be in the character of remuneration, has force. The payments made by Uber to the drivers and partners do not have that character.

However, and whilst “in relation to” is to be construed in the same sense, it is of wider ambit than “for”. To be “in relation to” the work, the payment does not have to have the character of remuneration (not least of all because the person receiving the money does not have to be the person who does the work)/ But some form of reciprocity or ascertainable calibration between the money paid and the work done is required. Not just any relationship of any kind whatsoever will suffice: cf Loan Market Group Pty Ltd v Chief Commissioner of State Revenue [2024] NSWSC 390 at [288]. An evaluative judgement is required, which must be made with the objects of Division 7 squarely in mind.

The overall intention behind Division 7 and its predecessor inserted into the Payroll Tax Act 1971 (NSW) in 1985 as elucidated by the Explanatory Note to the 1985 Bill and referred to by Payne JA at first instance in Downer EDI Engineering Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 743 is to capture several means of disguising the employer-employee relationship by contractual arrangements which had been increasingly resorted to by persons seeking to defeat the objects of the Act. That is not this case.

Characterisation of the payments made by Uber must proceed by reference to the Contracts which reflect and govern the legal relationship between the contracting parties and by reference to the rights and obligations to which the Contracts give rise: see CFMEU v Personnel Contracting Pty Ltd (2022) 275 CLR 165.

The terms of the Contracts which reflect and govern that legal relationship are now set out. Where, in the following excerpts, clauses refer to an affiliated company in Uber’s corporate group, it has been replaced with the word ‘Uber’.

Clause 8.1 relevantly provides:

Clause 9.1 of the Partner Contract provides:

Clause 4 of the Rider Contract provides:

It was not suggested that the Contracts do not operate according to their tenor.

It is not Uber who pays the driver. The rider does that. Uber is a mere “payment collection agent”. True it is that Uber has to account to the driver or partner for what it has received as agent, but by the time it does that, the driver has, in accordance with the legal relationship between the parties, already been paid, and the rider has discharged their obligation to pay the driver for the ride. [6] The quoted clauses of the Contracts provide expressly that riders’ payments are considered the same as payment made directly by the rider to the driver or partner.

There is undoubtedly some form of relationship between Uber’s payment and the work which the driver performed, not least of all because, had the driver not driven, there would no money for which Uber would have to account to the driver by paying the driver. But I do not consider that that relationship is one which can fairly be described as being “in relation to” the work, in the context in which that phrase appears in s 35(1) and with the objects of Division 7 squarely in mind.

There is no element of reciprocity or calibration between the driver and Uber or the rider and Uber with respect to the money paid by the rider. Those elements exist only between the driver and the rider. The payment here is made pursuant to an obligation to account, and no more.

What the rider pays the driver is for or in relation to the work done by the driver. What Uber pays the driver is in relation to the payment Uber has received, not in relation to the work itself.

Uber put the formal and untenable submission that no money was payable or paid by Uber. I do not propose to deal with it as this proposition was rejected by the Victorian Court of Appeal in Commissioner of State Revenue v The Optical Superstore Pty Ltd [2019] VSCA 197; see too Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40.

I conclude that the payments by Uber do not fall within s 35(1) and therefore are not to be taken as wages.

The consequence is that the Assessments must be revoked.

Division 1 of Part 5 of the Taxation Administration Act 1996 (NSW) headed ‘Interest’ is reproduced below.

Because Uber has succeeded with respect to the entirety of the challenged Assessments, no interest is payable. However, if otherwise payable, I would nevertheless, in the exercise of the Court’s discretion which is at large, remit the entirety of the premium component of interest because (not in any order of precedence):

The Court makes the following orders:

I will hear the parties on costs if necessary. The exhibits are to be returned.