REVEALED: Austria to introduce new tax brackets from 2024
Austrian Chancellor Karl Nehammer’s government has announced a major tax reform, which will see taxpayers keep more of the money they earn starting in next tax year.
The measures follow from the government’s decision to abolish so-called ‘cold progression’ last year.
This basically refers to how tax brackets haven’t kept up with inflation. For example, the current basic tax-free amount of €11,000 means that people working in Austria only get taxed on the money they make above this amount in any given year.
However, due to recent inflation, €11,000 doesn’t buy the same things that it used to. The government argues it needs to raise tax brackets in order to provide people with cost of living relief.
So the basic amount is being raised around ten percent to €12,816. This means that in the future, people in Austria will only have to pay tax on amounts they earn which are above this amount. With the bracket increases, people will pay 20 percent tax on any income between €12,816 and €20,818 per year.
Other tariff levels are increasing as well though, by anywhere from around seven percent to close to ten percent.
Income between €20,819 and €34,513 will see a tax of 30 percent. Between €34,514 and €66,612 will be taxed at 40 percent. From €66,613 to €99,266 will see a 48 percent rate of tax.
Any earnings above that ceiling will be taxed at 50 percent.
READ ALSO: How high is the tax burden in Austria compared to other countries?
Self-employed basic tax-free amounts to go up
Austria’s self-employed – who typically have to pay 27 percent of their gross earnings in health and social insurance before paying tax on the rest, will see particular relief. The government plans to increase their basic tax amount to €33,000.
Additional child allowances to rise
Additional child allowances – which provide tax relief to lower income families – will also see a raise from €550 to €700 per year.
Childcare subsidies from employers – for example if the employer provides a daycare – are currently taxed in Austria, although the first €1,000 comes tax-free. The government plans to up this to €2,000.
Overtime allowances being raised
Chancellor Nehammer’s government is also looking to raise overtime allowances. This refers to an amount of money that workers can keep tax-free if that money was earned during overtime hours.
Austrian Chancellor Karl Nehammer made the tax reform announcement Friday. Photo: Stefanie Loos / POOL / AFP.
Right now, the first €86 a month a person earns from overtime hours isn’t taxed at all. The government wants to raise this to €120. Monthly tax-free allowances for working Sundays, nights, or on public holidays could also increase to €400.
Home Office tax rules extended
Home office tax deductions, which the government introduced for people working from home in 2021, are now to be made permanent.
Deduction amounts also to be adjusted
The government’s tax reform plan will also see deduction amounts automatically adjusted to 100 percent of the inflation amount, instead of the current two-thirds. This means that tax credits people can claim on their yearly returns – such as the single earner, single parent, and dependent tax deductions, as well as transport and pensioner tax credits – will rise with the level of inflation.
READ ALSO: Everything you need to know about filing taxes in Austria
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The measures follow from the government’s decision to abolish so-called ‘cold progression’ last year.
This basically refers to how tax brackets haven’t kept up with inflation. For example, the current basic tax-free amount of €11,000 means that people working in Austria only get taxed on the money they make above this amount in any given year.
However, due to recent inflation, €11,000 doesn’t buy the same things that it used to. The government argues it needs to raise tax brackets in order to provide people with cost of living relief.
So the basic amount is being raised around ten percent to €12,816. This means that in the future, people in Austria will only have to pay tax on amounts they earn which are above this amount. With the bracket increases, people will pay 20 percent tax on any income between €12,816 and €20,818 per year.
Other tariff levels are increasing as well though, by anywhere from around seven percent to close to ten percent.
Income between €20,819 and €34,513 will see a tax of 30 percent. Between €34,514 and €66,612 will be taxed at 40 percent. From €66,613 to €99,266 will see a 48 percent rate of tax.
Any earnings above that ceiling will be taxed at 50 percent.
READ ALSO: How high is the tax burden in Austria compared to other countries?
Self-employed basic tax-free amounts to go up
Austria’s self-employed – who typically have to pay 27 percent of their gross earnings in health and social insurance before paying tax on the rest, will see particular relief. The government plans to increase their basic tax amount to €33,000.
Additional child allowances to rise
Additional child allowances – which provide tax relief to lower income families – will also see a raise from €550 to €700 per year.
Childcare subsidies from employers – for example if the employer provides a daycare – are currently taxed in Austria, although the first €1,000 comes tax-free. The government plans to up this to €2,000.
Overtime allowances being raised
Chancellor Nehammer’s government is also looking to raise overtime allowances. This refers to an amount of money that workers can keep tax-free if that money was earned during overtime hours.
Right now, the first €86 a month a person earns from overtime hours isn’t taxed at all. The government wants to raise this to €120. Monthly tax-free allowances for working Sundays, nights, or on public holidays could also increase to €400.
Home Office tax rules extended
Home office tax deductions, which the government introduced for people working from home in 2021, are now to be made permanent.
Deduction amounts also to be adjusted
The government’s tax reform plan will also see deduction amounts automatically adjusted to 100 percent of the inflation amount, instead of the current two-thirds. This means that tax credits people can claim on their yearly returns – such as the single earner, single parent, and dependent tax deductions, as well as transport and pensioner tax credits – will rise with the level of inflation.
READ ALSO: Everything you need to know about filing taxes in Austria
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