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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.

The family allowance payouts per child will increase to €180 per child in 2022. Additionally, in August, there will be an additional payment, a “13th family allowance pay”.

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.

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Austria looking to cut energy bills in old residential buildings

The Austrian government is planning to reduce gas bills for people who rent Altbau apartments, one of the measures to cushion rising prices.

Austria looking to cut energy bills in old residential buildings

Austria has plans to reduce gas bills for people renting an Altbau, or old buildings, which often fall under rent control laws.

Justice Minister Alma Zadic (Greens) is looking into how a price reduction for gas heating could be implemented after the idea was floated by Vice Chancellor Werner Kogler (Greens), broadcaster ORF reported.

READ ALSO: ENERGY CRISIS: Will Austria have enough gas for winter?

“The tenants get a high bill but have zero leeway to change their heating system themselves,” Kogler told Austrian media.

Austria’s ÖVP leading party said there is “no ban on thinking” and any idea should be debated and evaluated.

The old residential apartments have a central heating system and tenants cannot adjust it themselves. At the same time, Kogler wants to create incentives for apartment building owners and landlords to convert to renewable heating systems.

Opposition parties divided

The SPÖ is in favour of the measures, while right-wing FPÖ says they make “tenancy law even more confusing”.

Unsurprisingly, the landowners’ association (ÖHGB) said they saw Kogler’s proposal as impractical populism. Furthermore, they complain that changing the heating source is not an easy matter in Austria, where many options, such as heat pumps or district heating, are not available everywhere.

READ ALSO: Where are energy prices going up (again) in Austria?

There are currently around 250,000 apartments in Altbau buildings, most of them in the capital Vienna, and heated with gas.

Rising energy prices

The costs of gas (and electricity) are increasing in Austria, as The Local reported. State-run distributors EVN and Wien Energie announced earlier this month that prices were set to go up as of September.

In Lower Austria, around 50 percent of EVN consumers should expect to pay at least €100 more monthly. The hike will affect those on a “classic tariff”.

READ ALSO: Five of the biggest challenges facing Austria right now

At Wien Energie, electricity prices will go up by €36 a month (based on an annual consumption of 2,000 kWh), and gas prices will increase by €60 a month (based on 8,000 kWh). However, those with a price guarantee or floating tariff will not be affected.

Austria is looking to cushion the increasing costs for its population and is working on an electricity price cap. Earlier this year, the government sent out €150 energy vouchers people could use to get a discount on their yearly energy bills.

Regionally, similar measures have already been taken, especially in Lower Austria, where a €250 million funding plan was recently announced.

Vienna has announced an extensive package with one-off payments of €200 and structural measures that will benefit more than one million residents in the Austrian capital, as The Local reported.