Australia's 2026 Tax Reform Bill Has Passed — Here's What PAYG Employees Should Know
The Albanese Government's tax reform bill is now law. We break down what the income tax cuts mean for novated lease holders and salary packaging. Read on.
On 25 June 2026, the Albanese Government's first tax reform bill passed Parliament and became law. According to the Treasury Ministers release [Source 1], the legislation locks in further rounds of income tax cuts, introduces the Working Australians Tax Offset, and delivers an instant tax deduction for workers. The Government says the average worker will benefit by up to $2,816 a year from 2028 — though that figure depends on individual circumstances and income levels.
If you're a PAYG employee, you've probably heard the phrase 'income tax cut' and wondered whether it changes the maths on salary packaging. The short answer: it's complicated, and the interaction with novated leasing is worth understanding properly.
What this means for novated lease customers
Novated leasing works by redirecting a portion of your pre-tax salary to cover vehicle costs, reducing your taxable income. As income tax cuts lower the marginal rate you pay, the absolute dollar value of that pre-tax reduction shifts too. Lower tax rates generally mean the headline tax saving from salary packaging shrinks slightly in isolation — but the full picture is more nuanced than that.
The new Working Australians Tax Offset and the instant worker tax deduction introduced by this bill [Source 1] are separate mechanisms from the FBT treatment that underpins novated leasing. FBT rates and the EV FBT exemption are not directly altered by this bill, which means the structural tax advantage of novated leasing remains intact — including the full FBT exemption for eligible electric vehicles under existing law.
What changes is the baseline tax environment your lease sits inside. If your effective tax rate drops, it's worth revisiting your salary packaging mix to make sure you're still optimising. A broker who does this full-time (not a calculator on a car dealer's website) is the right person to run those numbers with you.
Common questions
Does this tax reform bill change the FBT exemption for electric vehicles?
No. The FBT exemption for eligible EVs below the luxury car tax threshold is a separate piece of legislation and is not amended by this bill. The EV FBT exemption remains in place as of the bill's passage.
If my income tax rate goes down, does my novated lease saving go down too?
Not necessarily in total terms. Lower marginal rates do affect the pre-tax component of your lease calculation, but novated leasing also saves you GST on the vehicle purchase and running costs — which is unaffected by income tax changes. The overall saving depends on your specific income, vehicle, and lease structure.
What is the Working Australians Tax Offset and does it interact with salary packaging?
The Working Australians Tax Offset is a new offset introduced by this bill to reduce tax for eligible workers. Offsets apply after your taxable income is calculated — so if your novated lease already reduces your taxable income, the offset applies to that lower figure. The interaction is individual-specific; speak to a licensed broker or your accountant.
Should I wait for the new tax rates to kick in before setting up a novated lease?
Waiting means paying more tax and more GST in the meantime. The structural benefits of novated leasing exist under the current tax environment too. It's generally not worth delaying — but it is worth reviewing your existing lease if the new rates materially change your marginal rate.
Is millarX licensed to advise on this?
millarX holds Australian Credit Licence 569484, is a member of the FBAA and AFCA, and is accredited with Pepper. We can walk you through how the new tax environment affects your specific novated lease — without the sales fluff.