Believe it or not, the rideshare giant has a lot in common with general practice when it comes to tax.
Five judges at the Supreme Court of New South Wales have found on appeal that Uber owes payroll tax on money paid to its drivers, heavily citing a prominent GP payroll tax case – a move that may affect medical practices across the eastern states.
The prominent GP payroll tax case in question is Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue 2023, where a GP clinic was found to have relevant contracts with its tenant GPs and to therefore owe payroll tax.
It is widely considered as the case that kick-started the ongoing GP payroll tax crisis across the eastern states.
The judgement in Chief Commissioner of State Revenue v Uber Australia Pty Ltd, which was published on Friday 1 August, mentions Thomas and Naazno less than 35 times.
“The Uber case involved the exact same provisions in the Payroll Tax Act and the issues in dispute [as Thomas and Naaz],” K&L Gates partner and indirect tax lawyer Matthew Cridland told The Medical Republic.
“Whilst it’s a different sector – it’s obviously the gig economy rather than GPs – it’s an identical issue.
“With Uber, what Revenue New South Wales argued was that there is a relevant [contract] that the drivers enter into when they accept the terms and conditions to use the Uber app.
“… Specifically, they’re agreeing to do things like rate the passengers after each of the trips, refer their friends as Uber drivers, all of those sorts of things.
“Having established that there was a relevant contract revenue, New South Wales have said, well, when Uber pays the drivers the net amount of the ride share fee, that is subject to payroll tax.”
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The Uber case has been before NSW courts for several years; the crux of the issue is that Uber claims it is simply a “payment collection agent” and that drivers for the app do not work for it directly.
The NSW Chief Commissioner of State Revenue begs to disagree, and has assessed Uber as liable for payroll tax and interest to the sum of $81 million over the 2015-2020 financial years.
Cue court case.
In 2024, the NSW Supreme Court concluded that the rideshare service was not liable for payroll tax.
The state revenue office appealed this decision and won, which is what the 1 August judgement relates to.
It is Mr Cridland’s personal view that both the Thomas and Naaz case and the Uber case were incorrectly decided.
“Everybody in my occupation, professional indirect tax advisors, or payroll tax advisors, was very excited about [the initial Uber] decision in the first instance, because it would suggest the earlier cases, Thomas and Naaz specifically, were wrongly decided and that the Uber decision would overturn those earlier cases,” he said.
Medical accountant Kelly Chard told TMR that it was “unfortunate” that Thomas and Naaz was being brought into the spotlight again.
“Thomas and Naaz wasn’t a great representation of a well-structured medical practice, so it’s unfortunate that we have another case upholding some of the decisions there,” Ms Chard said.
“There are some correlations or comparisons you could draw between Uber and medical practice entities.”
The most salient comparison, she said, was that the Uber service fee taken out of the driver’s payment meant that the drivers were supplying services to Uber as well as to the rider.
“If you don’t have a great structured service and facility agreement or tenant doctor agreement, [this decision is] going to reinforce that there is probably services going both ways between the doctor and the practice, but also the doctor and the patient,” Ms Chard said.
“And when the doctor is supplying back to the practice, that’s when you’ve got the relevant contract issue.”
Ms Chard stressed that the decision did not necessarily reveal new information about general practice and payroll tax but rather re-affirmed previous rulings.
This would be particularly relevant for practices that continue to collect money on behalf of doctors as an agent; i.e. have not changed practices in the wake of payroll tax rulings.
“Even though there’s been a lot of talk about that over the last few years, there’s still a lot of practices operating on that [agent] basis just because of admin ease and or lack of action,” Ms Chard said.
“And this [decision] definitely confirms that those payments will be taxable wages.”
Adelaide-based healthcare accountant David Dahm’s main takeaway from the Uber decision was that courts would be determining whether businesses were employers or not based on a holistic review.
“You can do separate bank accounts and you can try and change the labels on things, but the substance matters,” he told TMR.
“Proving that what you [say you are] doing is exactly what you’re doing makes the difference … you can’t put lipstick on a pig.”
Payroll tax rules are harmonised across all states and territories bar Western Australia, meaning that the NSW Uber decision applies across Queensland, the Northern Territory, Victoria, Tasmania, South Australia and the Australian Capital Territory.
Most states and territories have now introduced some form of exemption for general practices on payroll tax; in most jurisdictions (ACT, NSW, Vic and SA) GP practices receive a payroll tax discount or reimbursement dependent on bulk billing.
“If you want to take advantage of the bulk billing threshold [in one of those states] – and you may or may not make it – you are basically self-reporting that you do have effectively contractors,” Mr Dahm said.
If the states then share that data with the Australian Tax Office, Mr Dahm said, it may raise questions about other taxes like GST.
“This becomes very complicated very, very quickly, and it actually inverts or reverses the arrangement that everybody originally intended,” he said.
“And that’s a bit of a problem.”
This story is not necessarily over. According to The Australian, Uber intends to seek an appeal on the appeal decision in the NSW High Court.
