Australia's Biggest Tax Reform in 25 Years — What PAYG Workers Need to Know
The Albanese Government's 2026 tax reform package cuts taxes for 13 million workers. Here's what it could mean for your novated lease. Read on.
On 12 May 2026, Treasurer Jim Chalmers announced what the government is calling the most significant tax reform package in more than a quarter of a century. According to the Treasury Ministers media release, the package is designed to reduce the tax burden for over 13 million workers, support first home buyers, and lower costs for businesses.
The headline grab is hard to ignore. But if you're a PAYG employee thinking about a novated lease — or already in one — the question isn't really about the politics. It's: does this change the numbers for me?
What this means for novated lease customers
Novated leasing works by redirecting a portion of your pre-tax salary to cover vehicle running costs, which reduces your taxable income. The benefit of that arrangement is directly tied to your marginal tax rate — the higher your rate, the more you save on the pre-tax portion.
If the 2026 reform package genuinely lowers marginal rates for a broad swathe of PAYG earners, the pre-tax saving from a novated lease could shift — in either direction depending on exactly where your income sits and how the new thresholds are drawn. Full legislative detail is still emerging, so it's too early to call winners and losers with precision. What we can say: the fundamental mechanics of novated leasing — pre-tax salary packaging, FBT exemptions for eligible EVs, and GST savings on the vehicle purchase — are not changed by this announcement.
The smart move right now is to model your specific scenario against the new proposed thresholds once the legislation is tabled, rather than assuming a blanket improvement or reduction. millarX will update its calculator the moment confirmed rate schedules are published by the ATO.
Common questions
Does the tax reform package change the FBT exemption for electric vehicles?
The May 2026 announcement does not reference any changes to the FBT exemption for eligible electric vehicles. That exemption remains in place under existing legislation. We'll flag immediately if that changes.
If my tax rate goes down, is a novated lease still worth it?
Almost certainly yes for most earners, though the exact benefit shifts with your marginal rate. Novated leasing also saves GST on the vehicle purchase price and bundles running costs — those benefits exist regardless of income tax rate changes.
When will the new tax rates actually take effect?
The Treasury announcement is a policy statement, not enacted law. Rates take effect once the legislation passes Parliament and receives Royal Assent. Watch for ATO guidance on confirmed start dates.
Should I wait to sign a novated lease until the new rates kick in?
There's no universal answer — it depends on your current rate, the vehicle you want, and how long legislation takes to pass. Waiting has a cost too: you're missing months of pre-tax contributions in the meantime. Talk through your specific situation with a millarX consultant.
Will millarX update its novated lease calculator to reflect the new rates?
Yes. Once the ATO publishes confirmed rate schedules, we'll update the calculator. Until then, any numbers you see elsewhere using the new rates are estimates, not confirmed figures.