2026 Federal Budget Tax Cuts: What PAYG Workers Need to Know
The Albanese government's 2026 Budget includes a $250 Working Australians Tax Offset and $1,000 instant deduction. Here's how it stacks up alongside a novated lease.
The federal government has announced a new round of cost-of-living measures in the 2025–26 Budget, including a $250 Working Australians Tax Offset and a $1,000 Instant Tax Deduction for workers, according to the Treasury Ministers media release [Source 1]. The offset is permanent from 2027–28; the instant deduction kicks in from 2026–27. Treasury says that combined with existing tax relief, the average worker could receive a combined benefit of up to $2,816 from 2027–28 [Source 1].
That's real money, and it's worth understanding. But it's also worth understanding what these measures do — and don't — do for your take-home pay compared with salary packaging strategies already available to you today.
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, reducing your taxable income. That mechanism is separate from, and stacks on top of, any general tax offsets the government announces. In other words, the new $250 offset and the $1,000 instant deduction don't replace the pre-tax benefit of a novated lease — they sit alongside it.
For EV drivers, the picture is even clearer. Electric vehicles that fall under the FBT exemption threshold continue to attract zero fringe benefits tax, a policy that remains in place under the current government. The 2026 Budget doesn't change that, but the broader push to reduce cost-of-living pressure signals that salary packaging tools are likely to remain politically supported.
If you've been sitting on the fence about whether a novated lease is worth it, the honest answer is: the government's tax cuts are modest and broad; a novated lease is targeted and — for the right vehicle and salary band — typically delivers a materially larger tax reduction. The two aren't in competition. You can benefit from both.
Common questions
Does the new $250 Working Australians Tax Offset replace the FBT exemption on EVs?
No. The $250 offset is a general income tax measure for all workers. The EV FBT exemption is a separate, vehicle-specific policy and remains in place. They operate independently.
Can I claim the $1,000 Instant Tax Deduction and still have a novated lease?
The $1,000 instant deduction applies to work-related expenses and is separate from novated leasing. You should confirm with your tax agent how both interact with your personal situation, as individual circumstances vary.
When do these Budget measures actually take effect?
According to the Treasury announcement [Source 1], the $1,000 Instant Tax Deduction applies from 2026–27 and the $250 Working Australians Tax Offset is permanent from 2027–28. Neither is backdated.
Does a novated lease still make sense given the new tax cuts?
For most PAYG employees considering a new car, a novated lease typically delivers a larger pre-tax benefit than a flat $250 offset — especially on an EV under the FBT exemption. The budget measures are an addition, not a substitute.
Is the EV FBT exemption at risk of being removed?
The 2026 Budget does not announce any changes to the EV FBT exemption. millarX will publish updates here if that changes. Any vehicle already on a novated lease at the time of a policy change would be subject to whatever transition rules apply.