The government agreed on this in connection with the abolition of bracket creep. In addition, the mileage allowance will increase, and will be set at a uniform 50 cents per kilometer for cars, motorcycles and bicycles. The agreement shows how “capable of action” the government is, stressed Chancellor Karl Nehammer (ÖVP) on Thursday following the latest coalition disputes.
TV analysis with OÖN economics chief Dietmar Mascher:
The so-called cold progression, a creeping tax increase, was abolished in the area of wage and income tax in 2023. Since then, the tax brackets have been adjusted every year to reflect inflation so that taxpayers no longer slip into higher tax brackets as a result of the annual wage increases. However, only two-thirds of the adjustment of the tariff brackets is automatic. The government must agree on the distribution of the remaining additional revenue.
“Focus on top performers”
When interpreting the agreement at a press conference in the Chancellery, the turquoise and green parties differed and addressed their own electorate: Finance Minister Magnus Brunner (ÖVP) spoke of a “performance third”, while Social Minister Johannes Rauch (Greens) preferred to use the term “social third”. The focus is “clearly on the top performers”, stressed Chancellor Nehammer. Those who work hard should also get more out of it. Vice Chancellor Werner Kogler (Greens) saw a package that would benefit everyone, especially families who don’t have so much.
- Video: Tax brackets will be raised by almost 4 percent
In any case, the ÖVP and the Greens have agreed to increase the tax brackets above inflation. All tax brackets (except for the maximum tax rate of 55 percent for incomes of 1 million euros or more) will be raised by almost four percent. From 2025, the limit for the first tariff bracket will be 13,308 euros, for the second tariff bracket 21,617 euros, for the third tariff bracket 35,836 euros, for the fourth tariff bracket 69,166 euros and for the fifth tariff bracket 103,072 euros. The deductions will be adjusted to the inflation rate.
The flexible third of the relief amount (651 million euros) will be used to implement further measures. For single earners or employed single parents with low incomes, the child allowance will be incorporated into permanent law in the form of an increased tax credit of 60 euros per month per child. This is “socially accurate,” emphasised Kogler. Around 250,000 children are affected, said Rauch, and the measure is an “enormously important step in the fight once morest child poverty”.
Kilometergeld: 50 Cent pro Kilometer
In future, the mileage allowance for cars, motorcycles and bicycles will be a uniform 50 cents per kilometer. At present it is 42 cents for cars, 24 cents for motorcycles and 38 cents for bicycles. The reimbursement of costs for using public transport on business trips will also be made more attractive. Daily and overnight allowances will also be increased: daily allowances for domestic business trips can then be up to 30 euros (previously 26.40 euros), and the overnight allowance will be increased from 15 to 17 euros.
In the case of company apartments, the living space that is completely free of non-cash benefits will be increased to 35 square meters, and common rooms will no longer be allocated in full to each individual resident, as was previously the case, but on a pro rata basis. This is particularly important for industry and tourism, explained Brunner.
In addition, the so-called small business limit will rise to 55,000 euros (currently 35,000 euros). This limit determines whether you are still considered a small business owner or are subject to standard taxation. The new limit applies to both sales tax and income tax, which also eliminates an existing discrepancy, as the government emphasizes.
“You see, the government rules”
Overall, the relief will amount to almost two billion euros next year, the finance minister stressed. “You see, the government is governing,” Vice Chancellor Kogler stressed. Unusually, there was no press foyer this week following the government meeting on Wednesday, but only on Thursday. However, this was less due to the government crisis surrounding the renaturation law than to football. The Chancellor and Vice Chancellor had to travel back from Leipzig, where they had watched the European Championship match between Austria and Turkey on Tuesday evening.
The government leadership did not miss the opportunity to mourn the defeat of the Austrian national team in the press foyer on Thursday: “Our team fought brilliantly,” said the Chancellor, and showed how valuable it is to form a team. They left the tournament with their heads held high, and their performance gave hope for the World Cup qualification. It was “very painful, almost heartbreaking” to watch the game from the stands, said Sports Minister Kogler. However, the team is “exemplary for many things in the Republic,” as they show solidarity and team spirit despite all adversities. So we can look to the future with optimism.
