What the 2026 Federal Budget Means for Novated Leases
The 2026 Federal Budget promises new tax relief for workers. Here's what PAYG employees should know about how it interacts with novated leasing. Read on.
Treasurer Jim Chalmers handed down the 2026 Federal Budget on 12 May 2026, flagging it as a package built around "resilience and reform" — with a particular focus on cost-of-living relief and new tax cuts for workers. According to the Treasury Ministers media release, the government is delivering "new tax relief for workers" as part of a broader push toward a "better tax system."
For most PAYG employees, that headline sounds promising. But what does it actually mean in practice — and does it change the value of salary packaging a car through a novated lease? Let's cut through the noise.
What this means for novated lease customers
Novated leasing works by redirecting a portion of your pre-tax salary to cover car running costs, which reduces your taxable income. When personal income tax rates shift — as flagged in this Budget — the interaction with salary packaging can change too.
If your effective tax rate drops, the raw tax saving from pre-tax contributions narrows slightly. That said, the FBT exemption for eligible battery electric vehicles (legislated separately) remains in place, and for EV drivers that exemption continues to be the headline benefit — one that isn't directly eroded by a modest rate cut at the lower end of the income scale.
For employees on middle to higher incomes, the pre-tax structuring benefit of a novated lease generally remains material. The Budget's stated goal of "taking pressure off inflation" and building stronger fiscal buffers doesn't alter the core mechanics of how a novated lease is taxed. As always, the actual benefit depends on your income, the vehicle you choose, and how your package is structured — which is exactly what millarX models for you before you sign anything.
One flag worth watching: the Budget references broader tax system reform. If further structural changes to FBT or salary sacrifice flow from this Budget's reform agenda, millarX will update this page. For now, no changes to the FBT rules or the EV exemption have been announced in the materials released to date.
Common questions
Does the 2026 Budget change the FBT exemption for electric vehicles?
Based on the Treasury Ministers release published 12 May 2026, no changes to the EV FBT exemption have been announced. The exemption for eligible zero-emission vehicles remains in place under existing legislation.
If I get a tax cut, does my novated lease saving shrink?
Marginally, yes — a lower marginal tax rate means a slightly smaller pre-tax benefit. However, the overall value of a novated lease comes from multiple components including GST savings on the vehicle and running costs, not just the income tax reduction alone.
Should I wait until after the Budget is fully legislated before starting a novated lease?
The tax relief measures still need to pass Parliament, so some details may shift. That said, the FBT rules governing novated leases are separate legislation and aren't affected by personal income tax rate changes. If you're ready, there's no strong reason to delay.
Who counts as eligible for the new worker tax relief?
The Budget announcement references tax relief for workers broadly, but the specific income thresholds and rate changes will be confirmed in the Budget papers and enabling legislation. Check the ATO website or speak to a tax adviser for your personal position.
Does millarX factor Budget changes into its lease quotes?
Yes. millarX builds quotes using current legislated tax rates and FBT rules. Once any Budget measures are legislated, our quoting tool is updated to reflect them — so what you see is what actually applies to you.