Budget Tax Cuts: What Australian Workers Should Know
The Albanese Government's 2025 Budget includes new tax offsets for workers. Here's what it means if you're considering a novated lease. Read more.
The Federal Government has announced a package of cost-of-living measures in the 2025–26 Budget, including a new $250 Working Australians Tax Offset (permanent, from 2027–28) and a $1,000 Instant Tax Deduction for workers from 2026–27. According to the Treasury Ministers release [Source 1], together with existing tax relief, the average Australian worker could receive a combined benefit of up to $2,816 from 2027–28.
These are separate from novated leasing — but they sit in the same conversation. If you're a PAYG employee thinking about how to keep more of what you earn, it's worth understanding how all the pieces fit together.
What this means for novated lease customers
A novated lease works by reducing your pre-tax salary, which lowers the income you're assessed on. That mechanism is independent of, but complementary to, tax offsets like the ones announced in this Budget. A lower taxable income means offsets like the Working Australians Tax Offset apply to a smaller base — so you're not double-dipping, but you're also not losing anything.
The practical point: tax offsets reduce your liability dollar-for-dollar, while pre-tax salary packaging (via a novated lease) reduces the income that gets taxed in the first place. Both reduce what you hand to the ATO. Used together, a novated lease and these new offsets can each do their own work — they don't cancel each other out.
If you're already in a novated lease, or considering one, the Budget's direction — more take-home pay for workers — reinforces the case for structuring your finances to minimise tax where you legally can. The FBT exemption for eligible EVs remains in place under current law [Source 1], which continues to make electric vehicles particularly compelling under a novated lease arrangement for employees who qualify.
Common questions
Does the new $250 Working Australians Tax Offset affect my novated lease?
Not directly. The offset reduces your final tax bill independently of how your salary is structured. A novated lease reduces your taxable income before the offset is applied — the two measures work at different stages of the tax calculation and don't conflict.
When do these new tax measures kick in?
The $1,000 Instant Tax Deduction applies from 2026–27, and the $250 Working Australians Tax Offset is permanent from 2027–28, according to the Treasury Ministers Budget announcement [Source 1]. Neither is in effect right now.
Does this Budget change the EV FBT exemption?
No changes to the EV FBT exemption have been announced in this Budget release. Eligible zero and low-emission vehicles under the novated lease FBT exemption remain unaffected based on current information.
Is a novated lease still worth it with these new offsets available?
The offsets and a novated lease target different parts of your tax position. A novated lease packages pre-tax dollars toward your vehicle and running costs, which can generate meaningful potential savings on top of whatever tax offset you're entitled to. They're not an either/or choice.
Who qualifies for the Working Australians Tax Offset?
The Budget announcement describes it as a tax offset for every working Australian taxpayer, but the full eligibility criteria will be legislated. Check the ATO's guidance once the legislation passes for the definitive rules.