Austria unveils €2 billion relief package to fight rising cost of living

There will be changes to the commuter allowance and increasing public transport investments, but the package has also been criticised.

metro in austria station mask men
Austria has decided on a relief package for residents. (Photo by ALEX HALADA / AFP)

As the cost of living increases in Austria and Europe in general, governments scramble to halt inflation and galloping energy prices. Austria this weekend unveiled a package with some €2 billion promised as a relief for citizens. 

The primary measure is a reduction in taxes on natural gas and electricity by the end of June 2023, which is expected to cost €900 million and should cut tax by 90 per cent.

Additionally, there will be a 50 per cent increase in the commuter allowance and an increase in the “commuter euro”, which reduces income tax levies by €2 per kilometre distance between the place of residence and workplace. These should cost €400 million.

READ ALSO: UPDATED: How to save money on fuel costs in Austria

The package includes a €150 million investment in public transport to increase offers and lower prices. However, the government hasn’t given any specific details on these proposals.

Some €120 million will be spent in helping self-employed, small and medium-sized companies with high fuel costs switch to more sustainable energy sources. Finally, a further €250 million is set to be invested in wind and solar power generation.

One-off payments

This is the second relief package announced in less than 30 days by Austrian authorities.

The country’s National Council approved late last month one-off payments to ease the current cost of living crisis for specific households in the country.

Almost every Austrian who earns no more than €5,670 per month will receive a voucher for €150 euros to cushion the increased energy bill. Low-income people should get €300 after the €1.7 billion expense was approved.

READ ALSO: Cost of living: Petrol crosses €2 per litre in some parts of Austria

Coalition talks

It has taken a lot of negotiation and persuasion to reach an agreement between both coalition members, several Austrian media sources reported.

ÖVP spokespeople stated that their junior partners, the Greens, were reluctant to provide any financial support to drivers. A reduction in VAT on fuels was also off the table because it wouldn’t be allowed under European law, Kurier said.

“The targeted measures don’t provide relief to those who drive their second-car SUV through the city centre for fun”, but benefits people on their way to work, said Environment Minister Leonore Gewessler (Greens).

She reiterated that rising costs were mainly due to the Ukrainian conflict and Russia’s policies. “It is extremely important to name the culpable person for this price increase: Vladimir Putin”, the politician said.

In the future, Austria should diversify its energy matrix to reduce its dependence on Russian gas, especially with expanding renewable energies, the minister said.

“The sun and the wind don’t send us an invoice. Gazprom does”, she added.

Numerous reactions and criticism

The package did not come without some criticism.

The ​​Austrian trade union federation (ÖGB) stated the cuts were too timid and pointed out increasing the commuter allowance helped higher earners more than those on lower salaries, in strong disagreement with the government.

SPÖ spokesperson for energy matters also stated that the measures would benefit higher earners. Alois Schroll said in a press release that the package brought only small steps that wouldn’t properly “counteract the wave of inflation or really relieve people”.

For the Neos, the package is “cosmetics, not sustainable relief”, and FPÖ leader Herbert Kick also said that “too little relief is received by the people affected”.

Environmental organisations such as WWF criticised the lack of measures to save energy, especially the incentives for commuters who drive instead of using public transportation.

Useful vocabulary

Pendlerpauschale – commuter allowance
Entlastungspaket – relief package
Steuer – tax
Umweltorganisationen – Environmental organisations

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EXPLAINED: The main Austrian ‘tax traps’ foreigners should be aware of

Moving to a new country results in a series of adaptations, and getting used to a different tax system is definitely one of them. Here's what you need to know.

EXPLAINED: The main Austrian 'tax traps' foreigners should be aware of

When you move into a new country, there are many things to learn and get used to.

But, unfortunately, there are also many “traps”, those differences in systems and cultures that can catch a foreigner entirely off guard while seeming normal to all native or long-time residents of a country.

In Austria, there are many particularities, not only when it comes to culture – how many times are immigrants surprised with Freikörperkultur, for example? – but also with bureaucratic and day-to-day issues.

For example, foreigners are often surprised to learn that the alpine country has a mandatory public health system with several insurers, and each person is legally required to be insured by one of them.

Which one? It depends mainly on your profession.

READ ALSO: Everything foreigners need to know about the Austrian healthcare system

When it comes to taxes, several specificities could be confusing to non-Austrians or people who have recently moved to the country. The Local spoke with Dr Rainer Kratochwill, a tax adviser, owner and CEO of, to help foreigners avoid the typical “tax traps” one may find when moving to Austria.

Documentation is key

In some countries, it may be common practice to call tax authorities directly or send letters to them trying to explain or rectify issues they might have had.

“We sometimes have to overcome the expats’ desire to explain something to the tax office over the phone or appeal to common sense. In Austria, this will probably not work.”, says Dr Kratochwill.

Austria is a very formal country in many ways. Titles and official papers (literal papers, mailed and stamped, not emails) matter.

In many circumstances, expats end up needing to draw up a cover letter with the help of a tax advisor to follow specific Austrian standards.

READ ALSO: Will inflation force tax changes in Austria from 2023?

Documentation is also absolutely essential to support the origin of funds, Kratochwill highlights.

One thing many immigrants are surprised to learn is that large gifted sums or properties need to be registered with the tax office – and it is mandatory to provide the documentation of the origin of the funds from the giver.

“This point has to be further explained to expats because they often do not understand why the donor has to be verified and what documents can be provided”, he says.

So, don’t fall into the trap of taking a laissez-faire approach to Austrian authorities and documentation.

Taxes are high – but so is the standard of living

Kratochwill noted how many of their immigrant clients are used to paying fewer taxes in their home countries. That is another trap incomers might set up for themselves: “be prepared to pay high taxes in Austria”, he says.

“But for this, you have a lot: security, good public transport, good schools and universities and much more”, he added.

READ ALSO: How to prepare for your Austrian tax return if you’re self-employed

Austria works with a bracket system for income tax. So the higher you earn, the higher the taxes – up to 55 per cent for those making a whopping €1 million after expenses.

Up to €11,000 annual income, there is no income tax. However, whatever surpasses that falls into the next bracket (from €11,000 to €18,000) and is taxed at 20 per cent.

This means that if you earn, for example, €12,000 a year netto (after expenses and deductions), € 11,000 would be tax-free, and the remaining €1,000 would be taxed at 20 per cent – you’d pay € 200 income tax for the year.

The income tax is after other social contributions that pay for compulsory health insurance, social payments, and pension funds.

Many Austrians have tax advisors

A tax advisor is not the same as an accountant. For many people, the thought of paying someone to assist with their tax return may be strange – it might seem like something only millionaires do.

READ ALSO: Everything you need to know about paying tax in Austria

But it is relatively common practice in Austria, as advisors support their clients to pay according to the law, but no more than what they need to.

“An important rule is to consult in advance so that there is time to make adjustments. It is often too late, but even in these situations, we help reduce the tax burden a bit through, for example, tax refunds.” Kratochwill says.

Taxes can be filed in three years

And audited even later than that.

In Austria, you have from one to five years to file your income tax (even longer if you do it through a tax advisor or in exceptional cases like during the pandemic), depending on your case. However, Dr Kratochwill advises against taking advantage of the long filing periods.

“The main thing an expat should keep in mind is to do it the right way from the beginning on and not start thinking about it after three years”.

In a country with a complex tax system, knowing your earnings and expenses, having your finances documented, and storing those files is crucial. And because tax audits can happen up to ten years after the filing (tax advisors will tell you to keep your documents for at least that long), Austrians know to keep their files for a very long time.

READ ALSO: Five things you will find in (almost) every Austrian home

This is why you will often see shelves full of binders in your local friend’s house – they are storing that receipt for that English class they took five years ago.

Do as your Austrian friend and save yourself some trouble in future years by saving your papers now.