Inflation Is Still High — Here's What It Means for Your Novated Lease
Headline inflation hit 4.2% in April 2026. Find out what that means for novated leasing, EV running costs, and your take-home pay. Plain-English breakdown.
Australia's headline inflation came in at 4.2 per cent in the 12 months to April 2026, down from 4.6 per cent in March — a bigger drop than most market economists expected. Trimmed mean inflation (the RBA's preferred measure) edged up slightly to 3.4 per cent. According to the Treasury Ministers release [Source 1], while the moderation is welcome, inflation "remains much higher than we'd like" and global pressures — particularly from the conflict in the Middle East — continue to feed through into the Australian economy.
For most PAYG employees, persistent inflation means one thing: your dollar buys less every month. Wages are being chased by rising costs, and the gap between what you earn and what you keep is the real problem.
What this means for novated lease customers
A novated lease doesn't make inflation disappear, but it does let you pay for a car — including fuel or electricity, registration, insurance, and servicing — with pre-tax dollars. When prices are elevated across the board, pulling those running costs out of your gross income before the ATO takes its share is one of the few structural advantages available to ordinary employees.
For EV drivers specifically, the fringe benefits tax exemption (still in place as of the date of this article, subject to the legislated income cap threshold — check [Source 1] for the latest government position on cost-of-living policy) means the after-tax cost of running a battery electric vehicle through a novated lease can be materially lower than owning the same car outright. That gap tends to widen when inflation is pushing up everyday expenses, because the pre-tax benefit is worth more in real terms when your marginal rate is eating into a squeezed budget.
None of this is magic — you're still committing to a lease term and residual value. But in a high-inflation environment, structures that reduce your taxable income deserve a closer look than they might get when times are easy.
Common questions
Does inflation affect the FBT-exempt EV threshold?
The luxury car tax threshold and the EV FBT exemption cap are adjusted periodically — they are not automatically indexed to CPI in the same way as some other thresholds. You should check the ATO's current ruling or speak with a licensed adviser before assuming a specific vehicle qualifies.
If inflation is high, should I lock into a novated lease now or wait?
Timing the economy is hard. What a novated lease does is reduce your taxable income on a recurring basis — that benefit exists regardless of where inflation sits. The more relevant question is whether the vehicle and term suit your situation, not whether inflation is at 4.2 or 3.5 per cent.
Does a novated lease protect me from rising fuel or electricity costs?
Not directly — fuel and charging costs in your lease budget are estimated at the start of the term. If energy prices rise significantly, you may need to top up your running-cost budget. EVs generally have lower and more predictable energy costs than petrol vehicles, which is one reason they're popular for novated leasing.
How does millarX handle my money?
Customer funds at millarX are held in segregated accounts. millarX operates under ACL 569484, is a member of the FBAA and AFCA, and is accredited with Pepper Finance. Westpac has ranked millarX its number one novated broker.