Uber decision highlights GP payroll vulnerabilities, accountant warns

On 1 August 2025, the NSW Court of Appeal unanimously determined that Uber drivers were employed by the company under “relevant contracts” and money paid to its drivers were wages under the Payroll Tax Act 2007.

The decision could have strong implications for medical practices, highlighting that authorities were focused on commercial reality over contract wording when it came to determining “employee-like” relationships.

David Dahm, a chartered accountant who specialises in health practice advisory, warned that many medical practices were structured incorrectly, risking significant payroll tax liabilities.

“Financial literacy is not good in the medical world,” Dahm told Accounting Times.

“I had pretty much real-time face-to-face evidence looking at how accountants across Australia would set up [medical] practices. And I noticed there was a slight problem; they weren't quite doing it quite correctly.”

Dahm warned that it appeared that there was a broad lack of understanding across the legal and accounting professions regarding the “service entity arrangement”, which he deemed was the most tax-efficient for medical practices.

In such an arrangement, doctors would operate as independent practitioners under a single roof and pay ‘service fees’ to a separate entity that handled administrative work, including general management and operation of the practice.

However, if the arrangement began to resemble an employment structure too closely, Dahm warned that service entities could be subject to payroll tax.

“[Service entity structures] keep getting mischaracterised because lawyers and accountants are not aware of this service entity ruling,” he said.

“Lawyers aren't checking bank accounts, they're not checking funds flows. They're not checking the marketing and the advertising. It's, I call it tick and flick kind of advice. Practices are using templates, copying templates, and sharing them around like a dirty needle,” he said.

Dahm referenced a 2021 case concerning Thomas and Naaz, a pair who owned and operated four medical centres in NSW. They were ordered to pay $795,292 in retrospective payroll tax after the courts found that their payments to doctors were taxable wages.

He added that there was a widely held but false notion that maintaining separate bank accounts could minimise the risk of payroll tax liabilities.

Dahm advised that medical practices operating under a “service entity” arrangement, often known as a tenant doctor arrangement, ensure adequate separation between the medical business and the administrative business.

“Evidence carries more weight than these Uber contracts, and … at the end of the day, when the law looks at it, it says if the evidence contradicts the contract and it doesn't reflect what's actually happening, [third-party evidence will be relied upon].”

“That's why you go to the lawyer last, get your business model and all your commercial principles right and your structures right [first], and then you go to the lawyer.”

Tangible separation has become even more crucial in light of the recent Uber decision, which highlighted that authorities were increasingly focused on commercial reality over written contracts.

For example, if doctors answered the phone in the name of the medical centre, wore the same logo and branded front desk uniforms, and generally presented as a unified medical centre, the commercial reality could appear closer to a single business rather than a collective of independent practitioners.

According to Dahm, it was also critical that doctors under a ‘service fee arrangement’ were not governed by the administrative arm of the practice.

“Administration businesses should avoid setting practitioner fees, rating practitioners, monitoring their billing, redirecting patients away from them, or complying with RACGP accreditation standards unless they instruct you in writing to perform this type of service,” Dahm advised on his website, Health & Life.

Lisa To, head of tax and private clients at Bartier Perry, called the Uber decision a “wake-up” call for businesses that relied heavily on contractors.

“Businesses should take practical steps to mitigate payroll tax risks, starting with identifying all non-employee workers and reassessing whether their roles fall within the ‘relevant contract’ provisions.”

“This includes reviewing the level of control, integration into the business, and actual working arrangements.”

To avoid unexpected tax liabilities and associated penalties, she added that companies should ensure that their contractual agreements reflect commercial reality and be proactive with authorities if issues are identified.

“Contractor agreements should be updated to reflect the commercial reality, with clear terms around independence, delegation, and the use of tools.”