Wages Are Growing Above 3% — What That Means for Salary Packaging
ABS data confirms wages growing above 3% across 14 of 18 industries. Here's why rising wages and recent tax cuts change the novated lease equation for PAYG workers.
The May 2026 Federal Budget week brought a data point worth paying attention to: the ABS Wage Price Index grew 0.8 per cent in the March quarter 2026, and annual wages are now growing above three per cent in 14 of 18 industries — the longest consecutive streak above that threshold in more than 15 years, according to the Treasury Ministers release.
That's not just a headline for economists. If your gross salary is creeping upward, the mechanics of how a novated lease saves you money become more relevant — not less.
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. The higher your taxable income, the more income tax you're paying — and the larger the slice of tax you can potentially sidestep through salary packaging.
Rising wages cut both ways if you're not being strategic. A pay rise can push you into a higher marginal tax bracket, meaning more of every extra dollar goes to the ATO rather than your pocket. A novated lease is one of the few legitimate mechanisms a PAYG employee has to reduce that taxable income — and the Budget's own wage upgrade forecasts [Source 1] suggest this environment is sticking around.
For electric vehicles specifically, the FBT exemption introduced under the Treasury Laws Amendment (Electric Car Discount) Act remains in play, meaning eligible EVs on a novated lease attract zero FBT. Combined with wages growth, that's a material shift in how the numbers stack up compared to even two years ago. Potential savings are qualitative until you run your own numbers — use our calculator or speak to one of our brokers.
Common questions
Does a pay rise automatically make a novated lease more beneficial?
Not automatically — but it often does. A higher gross salary generally means a higher marginal tax rate, which increases the relative value of pre-tax deductions like a novated lease. The actual benefit depends on your specific income, vehicle choice, and usage. Run the numbers before assuming.
What's the connection between the Budget wage forecasts and my lease?
The 2026 Budget upgraded the wages outlook, meaning sustained income growth is expected across many industries. If your salary is likely to rise, locking in a novated lease structure now lets you capture the tax benefit on a growing income base — rather than scrambling to adjust later.
Is the EV FBT exemption still active after the 2026 Budget?
As of the May 2026 Budget, the FBT exemption for eligible battery electric and plug-in hybrid vehicles on novated leases remains in place. Always confirm current eligibility with a licensed broker — thresholds and vehicle lists do change.
I'm in one of the four industries where wages aren't growing above 3% — does novated leasing still make sense?
Possibly, yes. The pre-tax salary packaging benefit exists at any income level above the tax-free threshold. Slower wage growth doesn't eliminate the benefit — it just means the uplift from a pay rise isn't compounding it. Model your specific situation rather than relying on a rule of thumb.
How do the recent personal income tax cuts interact with novated leasing?
Tax cuts reduce the marginal rate some employees face, which can slightly reduce the gross tax saving from salary packaging — but they don't eliminate it. For most full-time PAYG workers, the combination of wages growth and pre-tax deductions still produces a meaningful outcome. A broker can show you the current net position.