By Michael Hammerl
In 2023, the cold progression, a gradual form of tax increase, was abolished in Austria. This results in one for 2025 A total relief of nearly two billion euros for taxpayers. Two-thirds of this amount will be used to automatically increase payment limits and deductibles.
What happens to the remaining third, which is expected to be worth €651 million by 2025, is left to the government. Principal Carl NehammerFinance Minister Magnus Brunner (both ÖVP), Vice-Chancellor Werner Koegler and Minister of Social Affairs John Rauch (The two Greens) provided details Thursday morning.
Salary is adjusted annually for inflation. At the same time, Austria has a progressive tax system: there are payment thresholds, above which you pay higher wage tax rates. If these pay limits don’t rise to the level of inflation, you’ll earn more in adjusted wages, but you’ll also pay proportionately more in taxes than before. Adjusted for inflation, there is less money left than the previous year. “Cold progression” describes this effect.
How the payment limits change
Nehhammer said that the relief for taxpayers from 2023 to 2025 by eliminating cold progress would be more than seven billion euros.
What effect does this have on the example of tariff scales? In 2022, income of 11,000 euros or more will be taxable. By eliminating cold progress, this limit was adjusted to the rate of inflation. In 2023, 11,693 euros are tax-free, and in 2024, 12,816 euros. And next year?
In 2025, 13,308 euros of income will be tax-free
In principle, all tax brackets (except the top tax rate of 55% for incomes of one million euros or more) will be increased by almost 4 percent. This will affect the following tariff levels from 2025:
- First payment level: 13,308 euros
- Second payment level: 21,617 euros
- Third payment level: 35,836 euros
- Fourth payment level: 69,166 euros
- Fifth payment level: 103,072 euros
Additionally, deductions including SV Refund and SV Bonus are adjusted “100 percent” for inflation rate.
What happens in variable three
As KURIER previously reported, Variable Three should primarily benefit high performers, families and organizations. In this context, the government is taking the following steps.
- Working single parents on a low income receive 60 euros per month plus child benefit.
- Daily and overnight allowances to be increased: Daily allowances for domestic business trips will be up to 30 euros (previously 26.40 euros). The overnight allowance will increase from 15 to 17 euros.
- Mileage allowance for cars, motorcycles and bicycles has been fixed uniformly at 50 cents per kilometre. “It helps everyone who uses their personal car for work,” says Nehammer.
- Anyone traveling for business on public transport will receive a transport subsidy of 50 cents for the first 50 kilometers from 2025.
- New regulations on benefits for company flats: The government is increasing the non-benefits living space to 35 m². In future, the common areas will not be fully allocated to each individual, but will be allocated on a proportional basis.
- In addition, the small business threshold will increase to 55,000 euros (currently 35,000 euros). This threshold determines whether you are still considered a small business owner or subject to regular taxation.
“Keep what we promised”
“We are keeping our promise to serve the people until the end of this legislative term,” Nehamer said. In addition to social justice, there is a need for functional equity. In variable three, Brunner says, “This time we have deliberately reduced the burden from the top tax brackets because we want to be a model for top performers and mid-sized businesses.”
Kogler particularly emphasizes measures against child poverty and single mothers. “No child should grow up in poverty. “This is one of my main concerns as social affairs minister,” Rauch insists.
