Austria

Inflation adjustment: Cold progression/bracket creep

From 1 January 2023 on, the effect of the cold progression should be counteracted as far as possible.

For this reason, each year many tax-relevant tax brackets, standard deductions, fixed payments, etc. will be valorised on an annual basis. The increase of the corresponding amounts is based on the inflation for the period June to May of the current year (arithmetic average).

2/3 of the calculated percentage will be used to increase the corresponding values as per 1 January of the next following year. The amounts that will be amended have to be announce via an ordinance by 31 August of the current year for the following year.

The tax rates will not be amended, only the applicable tax brackets.

In June 2026, the government's draft for the budget accompanying law for 2027 and 2028 was presented.

The key changes are:

• The flat-rate tax deductions for working from home and for a workplace at home will be abolished for financial/business years starting after 31 December 2026. Because the telework allowance will no longer be tax-free under income tax law, its preferential treatment for social security contributions will also end. 
• From 2027, the rules for splitting the Family Bonus Plus between eligible parents or guardians will change. For children older than four years, the bonus may generally be divided either 50:50 or 75:25 between the entitled persons.
• In 2028, several family-related payments will not be increased to reflect inflation. This affects the child tax credit, family allowance, multiple-child supplement, childcare allowance and family time bonus.

• From 2028, the employer contribution to the Family Burden Equalisation Fund will be reduced from 3.7% to 2.7%. At the same time, the current exemption for employees aged over 60 will be abolished, meaning employers will also have to pay this contribution for these older employees from 1 January 2028. 

• The maximum income amount on which social security contributions are calculated will be increased additionally in 2027 and 2028. This means higher earners may have to pay slightly more social security contributions.

• From 2027, employers will also have to pay unemployment insurance contributions for older employees who were previously exempt from compulsory unemployment insurance. In addition, reduced employee contributions for low-income workers will gradually be abolished, and the annual adjustment of retraining allowance will be temporarily suspended.
• The annual government contribution to the Social and Further Training Fund will be reduced for 2027 and 2028. Rules on transfers to the labour market reserve will be changed, and certain subsidies will have to be paid including the applicable VAT.