Wages Are Up and Tax Cuts Are Here — What That Means for Your Novated Lease
ABS data shows wages growing above 3% across 14 of 18 industries. Combined with Labor's tax cuts, your novated lease could stretch further. Here's how.
The ABS has confirmed what many workers are starting to feel in their pay packets: wages are growing above three per cent annually in 14 of 18 industries, with the wage price index rising 0.8 per cent in the March quarter 2026 alone. According to the Treasury Ministers release [Source 1], this is the longest consecutive streak of above-three-per-cent annual wages growth in more than a decade and a half — and Treasury expects it to continue, with the 2026 Budget upgrading the wages outlook.
For PAYG employees, that combination — higher gross wages plus legislated tax cuts — quietly shifts the maths on salary packaging. A novated lease works by redirecting a portion of your pre-tax salary to cover vehicle costs, so when your gross income rises, the pre-tax pool you're drawing from gets bigger, and the relative benefit of keeping money out of the taxman's reach tends to increase alongside it.
What this means for novated lease customers
Two things are moving in employees' favour at the same time right now. First, if your pay has increased — or is due to increase in a new enterprise agreement — a novated lease review is worth doing. The pre-tax deduction structure means a pay rise can amplify your potential savings, not just hand them straight to the ATO.
Second, the government's tax cuts reduce your marginal rate, which changes the FBT equation too. More take-home pay is a good problem to have, but it also means you should revisit your salary packaging strategy rather than assume last year's setup is still optimal. That's true whether you're already in a novated lease or sitting on the fence.
It's also worth noting that the FBT exemption for eligible electric vehicles remains in place — meaning EV drivers can potentially stack the benefit of rising wages, tax cuts, and a zero-FBT vehicle into a single package. According to the Treasury Ministers release [Source 1], the wages upgrade was confirmed alongside the 2026 Budget, so now is a practical moment to run the numbers.
Common questions
Does a pay rise automatically make my novated lease cheaper?
Not automatically — but it can increase the potential tax benefit, because more of your income sits in higher tax brackets. It's worth reassessing your lease structure whenever your gross salary changes materially.
How do the 2026 tax cuts interact with salary packaging?
Tax cuts reduce the marginal rate you pay on income above certain thresholds. Since novated leasing works by moving spending into the pre-tax space, the optimal deduction amount can shift when tax thresholds or rates change. A licensed broker can model this for your specific situation.
Does the EV FBT exemption still apply in 2026?
As of the 2026 Budget period, the FBT exemption for eligible battery electric vehicles under the luxury car tax threshold remains in place. Always confirm current eligibility with your employer and a licensed advisor, as policy can change.
My industry was one of the four below three per cent — does this still apply to me?
Yes. Even modest wage growth can still improve the case for novated leasing, particularly if you're considering an EV. The benefit depends on your gross income, tax bracket, and vehicle choice — not just wage growth rates.
How do I know if millarX is a legitimate provider?
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