Traditional wavelet packet audio compression algorithms do not utilize the temporal masking properties of the human auditory system, relying instead on simultaneous masking models. This paper presents the design and implementation of a perceptual wavelet audio coder by incorporating temporal and simultaneous masking models. The efficiency of the encoder was assessed based upon the number of bits required to code wavelet packet coefficients in each critical band, while retaining perceptual transparency. Subjective listening tests conforming to ITU-R BS.1116 revealed the bit rate is reduced by more than 17% compared to using a coder that only employs a simultaneous masking model.