Albanese Government's 2026 Tax Reform: What PAYG Workers Need to Know
The Government's Tax Reform No.1 Bill 2026 cuts income tax for 13M+ workers. Here's what that means if you're running a novated lease. Read the plain-English take.
On 27 May 2026, the Albanese Government introduced the Treasury Laws Amendment (Tax Reform No.1) Bill 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Bill 2026 into Parliament. According to the Treasury Ministers release [Source 1], the package is designed to deliver a new round of income tax cuts for more than 13 million Australian workers, simplify tax time, and help around 75,000 Australians into home ownership.
The headline measure is a new Working Australians Tax Offset — the successor to the old LMITO/LITO arrangements — alongside adjustments to income tax rates. The legislation also explicitly targets better alignment between how income from work and income from assets is taxed, which has broader implications for salary-packaged employees.
What this means for novated lease customers
A novated lease works by redirecting a portion of your pre-tax salary to cover vehicle running costs, which reduces your taxable income. When income tax rates fall, the maths shifts slightly — your marginal rate is part of what drives the tax benefit on the pre-tax component of a novated lease arrangement.
In plain English: lower income tax rates can reduce the raw tax saving on pre-tax contributions, but the overall equation still favours novated leasing for most PAYG employees — particularly on electric vehicles, which remain FBT-exempt under current law. The key variable is your marginal rate after the new offsets apply, not a blanket rule.
If you're already in a novated lease or considering one, it's worth modelling your position against your post-reform take-home pay rather than assuming the status quo. The reform also doesn't touch the FBT regime directly — that's a separate instrument — so the EV FBT exemption remains in place as legislated [Source 1].
Common questions
Does the 2026 tax reform change how FBT on novated leases is calculated?
Not directly. FBT is governed by separate legislation and the announced bills focus on income tax rates and offsets. The EV FBT exemption remains unaffected by this reform package as far as the legislation currently discloses.
If my income tax rate drops, does my novated lease saving shrink?
Potentially on the income tax component, yes — a lower marginal rate means each pre-tax dollar saved is worth slightly less in raw tax terms. However, GST savings on the vehicle purchase price and running costs are unaffected by income tax rate changes, so the overall benefit remains material for most employees.
Should I wait for the tax reform to pass before setting up a novated lease?
There's no strong reason to delay. The reform is designed to put more money in workers' pockets, not reduce the attractiveness of salary packaging. A novated lease structured after the legislation passes will simply reflect your updated marginal rate.
Who is eligible for the new Working Australians Tax Offset?
The Government states the new offset covers more than 13 million Australian workers. Exact income thresholds and phase-out rates will be confirmed once the bill progresses through Parliament — check the Treasury Ministers source for updates.
Where can I see the actual bill text?
The official media release and links to the bills are available on the Treasury Ministers website — see Source 1 below. For personalised advice on how the changes affect your novated lease, speak to a licensed adviser.