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EXPLAINED: How Austria’s new finance measures could benefit you

Austria has announced a €6 billion package to fight the impact of rising cost of living on residents. Here is what you should know about what's planned and whether you can benefit.

EXPLAINED: How Austria's new finance measures could benefit you
Tax Freedom Day in Austria has arrived later this year. Photo by Markus Spiske / Unsplash.

Austria’s federal government unveiled a series of measures worth billions of euros to fight the cost of living crisis. New steps include increasing family allowances, cutting taxes and one-off welfare payouts, as The Local has reported.

Some €5 billion is set aside for payments aimed at the public and households, whilst €1 billion is designated for entrepreneurs.

READ ALSO: Austria unveils €6 billion package to fight rising cost of living

A large part of the package is earmarked for increased social benefit payments – especially family allowances, and some could come already in summer.

However, most of the measures should be in place by October, and changes in the so-called “cold progression” ( the term used to describe increases in tax burdens which are based on increases in income but do not account for inflation) will come next year.

Here’s what will change for residents?

Higher payments and new payouts

One of the main short-term measures is the increase in benefits and one-off welfare payments.

Every resident in Austria will receive a €500 payment expected for autumn, possibly October. Children should receive half of this amount.

This payment is tied to Austria’s planned “Klimabonus” payments meant to offset the costs of a CO2 tax that has not yet been implemented in the country. It was initially set at €200 per person before being increased.

In August, there will be an additional payment, a “13th family allowance pay” regarding the family allowance (Familienbeihilfe) €180 per child.

READ ALSO: Reader question: Do I need to open a local bank account when moving to Austria?

A one-off payment of €300 is set aside for unemployed people and other “vulnerable groups”.

The payments will be made automatically by the Austrian government and responsible departments.

And higher allowances

Additionally, tax allowances will increase, especially the “Family Bonus Plus” deduction. While it is currently set at €1,500 per child per year, it should rise to €2,000.

Pensioners’ tax allowance is also increasing, at least for low to medium-sized pensions, by €500 already in the summer. Austria’s Senior Citizens’ Association celebrated the measure.

READ ALSO: Ten ways to save money on your trip to Austria this summer

“The increase in pensioner tax deduction amounts by up to €500 is accurate, quick to implement and fair”, said Ingrid Korosec, head of the association.

The payments and deductions will be automatically adjusted for inflation in the future.

End of the “cold progression”

Austria will also abolish the so-called “cold progression”, the term used to describe increases in tax burdens which are based on increases in income but do not account for inflation.

In Austria, tax brackets were not adjusted for inflation, meaning that salary increases due to the rising cost of living could bump people up to higher brackets with higher taxes, effectively negating the impact of any actual salary increases.

The details of the measure will be discussed and decided by the National Council over the summer, and changes will be brought in 2023.

Help for entrepreneurs and businesses

The inflation package will also benefit businesses in Austria, with a specific payment for those industries particularly reliant on energy and electricity.

Additionally, the government said it would reduce non-wage labour costs, including labour taxes and contributions that won’t affect salaries.

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

The announcement was welcomed by several industry representatives, including the Austrian Hotel Association (ÖHV).

“It is a pleasant surprise that the cold progression is finally being attacked, and there is room for targeted measures”, said Walter Veit, president of the ÖHV.

The federal government said that they would change deduction amounts in the future but that further details of a complex tax change would be decided only in Autumn.

Editor’s note: This story was updated on November 23rd to fix a mistake regarding the family allowance payouts. The correct information is that a one-off family allowance (Familienbeihilfe) payment of €180 per child would be made. 

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For members


Vienna Energy Bonus: How to get a €200 payout

The City of Vienna is sending out bonuses of €200 to households to help cushion the effects of rising energy costs. Here's what you need to know.

Vienna Energy Bonus: How to get a €200 payout

The City of Vienna announced on Monday, November 28th, more government assistance to cushion rising costs for residents. 

Viennese households will receive €200 in a new “energy bonus’, according to statements given by the City Councillor for Finance Peter Hanke (SPÖ). The administration said the bonus would benefit about two-thirds of all city homes.

Single households with a gross annual income of a maximum €40,000 or multi-person households with an income of up to €100,000 gross per year are entitled to receive the payment. 

READ ALSO: ‘I’m still waiting’: Foreigners in Austria still not been paid Klimabonus handout

The City of Vienna will send, from November 29th to December 13th, an information letter to every address registered as a main residence in the Austrian capital. The letter will contain a password that will need to be used for the online application. 

The bonus should arrive in the account specified in the application within a few days and the payment will be made automatically, Hanke said.

Online applications can start from December 5th and can be sent until March. You can check more information HERE.

The administration provides an online tool to help people calculate whether or not they are eligible. However, the city will check all applications afterwards, and if people who earn too much apply, they will have to pay back the bonus. 

READ ALSO: How expensive are gas and electricity in Austria right now?

Around €130 million is being spent on the subsidy, Hanke said.

Other subsidies and government assistance

Vienna has had other support for citizens, including transfers of €200 to help people of lower incomes cope with rising costs. 

The Austrian federal government has also announced several measures, from the €500 Klimabonus payment which went to every resident in the country to an energy price cap, as reported by The Local.