Five changes reshaping salary packaging in 2026-27 (and what to do about them)

There are big changes happening in the benefits world, and the new financial year has heralded shifts that are already having a ripple effect in organisations. Others are on the horizon - and a couple look set to reshape employees’ experiences. For HR teams, the real challenge is knowing what ‘s locked in, what’s still just talk and what needs to change behind the scenes to make sure what matters to employees’ lands.

Here is the Maxxia guide to the five developments employers should have on their radar right now.

We’ll cover:

1. A new $1,000 standard deduction for work expenses that is now in effect, and can reduce what employees can claim through salary packaging.
2. How the EV FBT discount is proposed to phase down in three stages from April 2027 – but it’s not yet law, and existing leases won’t be affected.
3. Why EVs and plug-in hybrids now need separate conversations.
4. How Payday Super, in effect from 1 July 2026, changes how often employers must pay super guarantee contributions.
5. What the ATO is focusing on when it comes to vehicle data, evidence and reporting around salary sacrificing.

1. What's in effect: A new work-expense deduction changes the salary packaging conversation

These changes apply from 1 July 2026 and first affects 2026–27 individual tax returns.

The ATO rules

Eligible Australian taxpayers can now receive a standard deduction of up to $1,000 for work-related expenses. It is automatically applied, and eligible employees do not need to have spent $1,000 or keep receipts to receive it. Employees claiming more than $1,000 in eligible work expenses can still claim their actual expenses, but they must keep the required records. ^{1, 2}

What this means for employees

Employees cannot receive two tax benefits for the same expense.

If an expense covered by the standard deduction is paid or reimbursed through salary packaging from 1 July 2026 to 31 March 2027, the employee’s available standard deduction may be reduced. Eligible union fees and memberships of trade, business or professional associations are treated separately and do not reduce the standard deduction. ^{1, 2}

What employers can do

• Map the work-related expenses currently available through salary packaging.
• Identify which expenses interact with the new standard deduction and which sit outside it.
• Update FAQs, benefit descriptions, calculators and educational information.
• Give HR and other relevant teams a simple explanation of salary packaging versus claiming a deduction.
• Align the message across HR, payroll, finance and the salary packaging provider/s.

2. What's Proposed: The EV Discount is proposed to change from April 2027

Announced by Government but not yet law.

The proposed changes

The current FBT exemption continues for eligible battery electric and hydrogen fuel-cell electric vehicles under today’s rules. The Government has proposed a three-phase change, which is not yet law. ^{3, 4, 5}

• Until 31 March 2027: the current full FBT exemption continues for eligible EVs below the applicable luxury car tax threshold.
• From 1 April 2027 to 31 March 2029: eligible EVs costing $75,000 or less retain the full discount; eligible EVs above $75,000 but below the applicable LCT threshold receive a 25% discount on the FBT otherwise payable.
• From 1 April 2029: all eligible EVs below the applicable LCT threshold would receive the 25% FBT discount as the ongoing policy.
• For 2026–27, the fuel-efficient vehicle LCT threshold is $91,661. That figure is relevant to current EV exemption eligibility, but price alone does not determine whether a vehicle qualifies - the vehicle and arrangement must meet all applicable conditions. ⁶

What this means for employees

Existing leases won’t be impacted by the proposed changes.

However, novated leases entered in 2026 may run beyond 31 March 2027, so employees will want to know what applies today, what may change, and what the Government’s existing-lease commitment means for them.

What employers can do

• Keep employee communications aligned with current law and label the 2027 settings as proposed.
• Prepare HR and other relevant teams for questions about leases extending beyond March 2027.
• Make sure calculators, vehicle lists, FAQs and education and campaign assets can be updated if legislation passes.
• Ensure payroll, finance, fleet and the novated leasing provider/s can distinguish existing and future arrangements.
• Monitor the legislation and communicate again when final rule changes are known.

3. What's currently law: PHEVs generally ceased qualifying from 1 April 2025, subject to transition rules.

EVs and plug-in hybrids now need different conversations

The ATO rules

Eligible battery electric and hydrogen fuel-cell electric vehicles can still qualify for the current exemption when all conditions are met, including through a novated lease.

Associated costs such as eligible charging electricity may also be exempt. A home charging station is not an exempt associated car expense and needs separate treatment. ^{5, 7}

Even where an EV is FBT-exempt, the employer may still need to calculate and report a fringe benefits amount on the employee’s income statement. “FBT-exempt” does not mean “nothing to administer” or “nothing to explain”. ^{7, 8}

PHEVs generally stopped qualifying for the electric-car exemption from 1 April 2025. Transitional treatment may continue where eligible use and a financially binding commitment existed before that date; a new commitment or change to the pre-existing arrangement can end the exemption. ^{9, 10}

The ATO has also introduced an optional shortcut method for eligible PHEV home-charging costs. Employers can use actual electricity costs instead, but either approach needs the right eligibility checks and evidence. ^{10, 11}

What this means for employees

• Employees with an eligible EV lease keep the FBT exemption, though a reportable fringe benefits amount may still appear on their income statement – this isn’t taxed, but it can be used in some government income tests. ^7,8
• Employees relying on a PHEV lease need to know whether transitional treatment still applies to them, since a new commitment or change to their arrangement can end the exemption. ^{9, 10}

What employers can do

• Separate EV and PHEV messaging in employee education.
• Identify PHEV leases relying on transitional treatment.
• Flag extensions, refinances, employer changes and contract variations before processing.
• Check how eligible home-charging reimbursements are calculated and evidenced.
• Explain that an exempt EV may still create a reportable fringe benefits amount on the employee’s income-statement .

4. Payday Super changes the rhythm of salary-sacrificed super

The ATO rules

Payday Super changes when employers pay super guarantee contributions: contributions generally need to reach an employee’s fund within seven business days after payday. The super guarantee rate remains at 12%, but the new “qualifying earnings” concept includes salary-sacrifice contributions and amounts that were previously part of salary or wages. ^{12, 13}

The Small Business Superannuation Clearing House closed permanently on 1 July 2026. ^{12, 14}

What this means for employees

For employees who salary sacrifice additional amounts to super, this is a back-end change with a visible employee impact – contributions should now reach their fund faster and on a different rhythm than before. ^{12, 13}

What employers can do

• Confirm how salary-sacrificed and compulsory super amounts are calculated, reported and transmitted.
• Check that employee and fund information is accurate enough to support the new payment timetable.
• Reconcile payroll, STP reporting, provider files and fund receipts.
• Document how rejected or delayed contributions will be identified and corrected.
• Update employee communications about when contributions should appear in their accounts.

5. ATO FOCUS: The ATO wants cleaner vehicle data, records and contributions

Not a new tax rate, but an active compliance priority.

The ATO rules

The ATO is focusing on employers that overlook private vehicle use, incorrectly treat travel as business use, apply exemptions to ineligible vehicles, claim reductions without evidence or report employee contributions inconsistently. A work vehicle can create an FBT issue where it is used privately or made available for private use, including when it is garaged at an employee’s home. ^{11, 17}

Salary sacrifice arrangements also need to be prospective. The ATO says an effective arrangement should be entered before the employee performs the work, usually documented in writing, and should prevent the employee from accessing the sacrificed cash salary. ^{18, 19}

For certain benefits, the ATO allows employers to use qualifying existing business records instead of prescribed declarations or travel diaries. This can reduce administration, but the records must still contain the required information by the relevant deadline. ^{20, 21}

What this means for employees

A new or varied salary sacrifice arrangement must be agreed in writing before the work is performed, and once salary is sacrificed, employees can’t access it as cash. ^{18, 19}

What employers can do

• Confirm who owns benefit setup, payroll rules, reconciliations, records and employee communications.
• Reconcile employee post-tax vehicle contributions across provider, payroll, FBT and income-tax reporting.
• Retain the records needed to support eligibility, exemptions and calculations.
• Use available alternative record-keeping options where appropriate, without assuming they remove the underlying information requirement.
• Escalate unusual vehicle or employment arrangements before treating them as exempt.

Keep the employee outcome front and centre

Strong administration matters because employees experience the result. Clear information, accurate deductions and access to relevant benefits can help people make informed choices and see more value in their overall remuneration.

Questions every employer should ask themselves

• Have we updated work-expense benefit descriptions for the new $1,000 deduction?
• Can employees distinguish current EV rules from proposed changes from April 2027?
• Can we identify PHEV arrangements relying on transitional treatment?
• Are salary-sacrificed super contributions flowing correctly under Payday Super?
• Can payroll, finance and our provider reconcile vehicle contributions and reporting?
• Do employees understand that FBT exemption can still result in a reportable fringe benefits amount on their income-statement?
• Are responsibilities and escalation paths clear across HR, payroll, finance, tax and the provider?

The settings may be complex, but the employee experience shouldn’t be. Maxxia helps employers connect policy, payroll and administration with clear information and practical support for their people.

Compliance risk can often be a process problem. A Maxxia Benefits Review can help you identify how your program is performing against industry benchmarks and find the efficiencies that keep your team ahead of the next change. Book a free Benefits Review.

1. ATO, Standard deduction – new legislation

2. ATO, Standard deduction – individual guidance

3. Treasury Ministers - Fairer tax treatment to encourage affordable EVs

4. ATO, Proposed sustainable FBT treatment of electric cars

5. ATO, Electric cars exemption

6. ATO, Luxury car tax rate and thresholds

7. ATO, Electric vehicles and FBT – employer fact sheet

8. ATO, Reportable fringe benefits for employees

9. ATO, FBT on plug-in hybrid electric vehicles

10. ATO, What’s new in FBT

11. ATO, Key updates for FBT tax time

12. ATO, About Payday Super

13. ATO, Payday superannuation announcements

14. ATO, Small Business Superannuation Clearing House closure

17. ATO, Fringe benefits tax issues attracting ATO attention

18. ATO, Salary sacrificing – employers

19. ATO, Salary sacrificing – employees

20. ATO, FBT alternative record keeping

21. ATO, Record keeping for FBT

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