The New Zealand Supreme Court has upheld a landmark ruling that four Uber drivers are employees, not independent contractors. This decision has far-reaching implications for both tax compliance and employment rights in the gig economy.
Employment Implications
The ruling means Uber drivers are entitled to the full suite of employee protections under the Employment Relations Act 2000, including:
- Minimum wages
- Holiday and sick leave entitlements
- KiwiSaver contributions
- The ability to raise personal grievances
Tax Implications
The case was not a tax case. The Income Tax Act 2007 has its own definition of employee however interpreting this has often relied on the general law of employment meaning that there is a high likelihood that this will have tax implications.
Historically, Uber drivers have operated as contractors, meaning:
- They filed their own tax returns
- Claimed deductions for vehicle expenses
- Registered for GST in some cases
As employees, these options disappear. Employees cannot deduct work-related expenses or register for GST on their wages. If this does carry through to tax, Inland Revenue may need to address historic tax positions, as past filings assumed contractor status
The lack of deductibility, particularly on things like the depreciation on vehicles and ability to deduct fuel costs will also have a significant impact on the viability for the driver.
While the position may seem a win for the drivers involved, the wider implications could be significant and may yet require some Government intervention.