Rideshare's win could influence aggregator's next move in court
As LMG’s ongoing legal battle over Revenue NSW’s payroll tax continues, a separate court case involving ride share platform Uber Australia has found that it’s not liable to pay almost $81 million in backdated payroll tax.
Sam White (pictured above), executive chairman of Australia’s largest aggregator LMG, said on Friday that LMG was in court to sort out the final issues and orders of its case with Revenue NSW.
“The outcome was the judgment being reserved, with final orders to be handed down in due course, which highlights complexity of the issue,” White said.
LMG had appealed Revenue NSW’s decision to impose payroll tax. In April, the NSW Supreme Court ruled that the aggregator was liable to pay the tax but granted it a number of exemptions.
These include engaging an offshore loan processor; engaging a family member in the business; engaging another business as a genuine service provider.
These new exemptions are addition to already existing exemptions – the less than 90 day exemption (brokers performing work for less than 90 days) as it relates to upfront commissions paid in a financial year; and the application of the two or more exemptions where a broker engages the services of a loan writer.
Another exemption is an agreed reduction on the total commissions to reflect the proportion paid in relation to non-labour components of a business.
Revenue NSW classified aggregators as “employers” of brokers and the court case involved an assessment which applied payroll tax for Loan Market brokers between the period of June 30, 2012, and June 30, 2018.
LMG launched its payroll tax appeal in May 2023, arguing that the payroll tax should not be payable because brokers are customers of aggregators, not employees.
Following the LMG judgment being reserved on Friday, White said it was interesting in the Uber payroll tax case appeal that NSW Supreme Court Justice David Hammerschlag sided with the taxpayer on September 6 when announcing his decision on the case.
“He agreed that drivers provide a service and there’s a contract in play but didn’t think the payments were in relation to the identified service performed,” White said.
“The decision was based on the contractual arrangements entered into by Uber, drivers, and passengers. We’ll be going through the decision details to consider the merits of a possible Loan Market appeal.”
Court ruling on Uber payroll tax appeal
In a court summary of the Uber appeal, Uber successfully challenged six payroll assessments for the 2015 to 2020 financial years issued by the chief commissioner of State Revenue, which totalled approximately $81m.
The Supreme Court determined that the payments made by Uber to drivers are not “for or in relation to the performance of work” and are not to be treated as wages under the Payroll Tax Act 2007 (NSW).
The court acknowledged that Uber had developed two 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 NSW Supreme Court judgment stated.
Justice Hammerschlag found that transporting riders (driving); giving feedback about riders (rating); and referring people to Uber for the purpose of them becoming drivers (referring) are all services and these are in relation to work.
He also found that the services supplied to Uber are under a contract, as defined under Section 32 (1) (b) of the Payroll Tax Act.
“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,” stated the judgment.
“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.”
But on the key point of whether payments made by Uber should be classed as wages under Section 35 and therefore liable to payroll tax, Hammerschlag’s ruling was that the payments do not fall within that section of the Act and “are not to be taken as wages”.
“It is not Uber who pays the driver,” he stated in the judgment. “The rider does that. Uber is a mere ‘payment collection agent’.”
“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.”
The judge found in favour of Uber, revoking the Revenue NSW payroll tax assessments applied to Uber.
