Tax Reform (“Budgetbegleitgesetz”) 2027/2028: Payroll Changes

1. Unemployment insurance (UI) or low-income earners

The reduction in unemployment insurance contributions for low-income earners will be abolished for new hires from 1 January 2027. This means that, instead of the previous employee contribution rates of 0%, 1% and 2%, the standard contribution rate of 2.95% will apply. For apprentices, the employee's share of unemployment insurance contributions will continue to be capped at 1.15%.

For employment relationships that began before 1 January 2027, a multi-year transitional arrangement applies:

2. Unemployment insurance contribution and IESG surcharge for older employees

From 1 January 2027, the general unemployment insurance exemption for employees aged 63 and over will be abolished. The employer's share of unemployment insurance contributions will therefore be payable until the date from which the person becomes entitled to an early or regular old-age pension.
The current exemption from the IESG (so called “Insolvency Remuneration Security Act”) surcharge for employees aged 63 and over will also be abolished. Here too, entitlement to an early or regular old-age pension will become the condition for exemption.

In addition, from the turn of the year it will no longer be possible to temporarily receive benefits from the Public Employment Service Austria (AMS) despite an existing entitlement to a corridor pension.

However, the age-based exemption under the Austrian General Social Insurance Act (ASVG) from accident insurance contributions for employees aged 60 and over will remain in place.

As a result of this change, payroll departments can expect to receive more requests for confirmation of the relevant pension entitlement date.

3. Maximum contribution base (“Höchstbeitragsgrundlage”) 2027

In addition to the annual adjustment, with the 2027 – inofficially announced - adjustment factor of 1,046, the maximum contribution base will be increased by an additional EUR 150 per month, or EUR 5 per day, in 2027 and by an additional EUR 50 per month, or EUR 1.67 per day, in 2028.

4. Remote working allowance (“Telearbeitspauschale”)

From 1 January 2027, the remote working allowance will no longer be exempt from tax and social security contributions. As a result of the change, it will no longer be necessary to record homeworking days in the payroll account.

Also relevant in this context: employees may continue to claim expenses of up to EUR 300 per calendar year for ergonomically suitable furniture located outside a dedicated home office. The previous requirement of at least 26 remote working days per year will no longer apply. However, the tax authorities may instead request a written remote working agreement from the employee, which must be provided by the employer.

5. Family Bonus Plus (“Familienbonus Plus”)

If a child living in the household has not yet reached the age of four, or if an increased family allowance is received for the child, one person may continue to claim 100% of the Family Bonus Plus in 2027. However, the allocation of the Family Bonus Plus will be restricted in the following circumstances:

If all children living in the household are already four years old and no increased family allowance is payable, the Family Bonus Plus must generally be split. It may be allocated at a ratio of 50:50 or 75:25. The previous option for one eligible person to claim 100% of the Family Bonus Plus in all cases will therefore cease to apply. The stated reason for this measure is to provide a “greater incentive to bring people into employment.”

For employees whose Family Bonus Plus has previously been considered in full, a new declaration must be obtained once form E 30 for 2027 becomes available. Our payroll experts will inform affected clients of the necessary action in due course.

6. Benefit-in-kind obligation for zero-emission vehicles from 2027

The current exemption from a taxable benefit in kind for electric company cars will end on 31 December 2026.

For electric vehicles, the benefit in kind will amount to 0.375% of acquisition costs in 2027, capped at EUR 180 based on acquisition costs of EUR 48,000. From 2028, it will amount to 0.625%, capped at EUR 300 based on acquisition costs of EUR 48,000. The new rules will also apply to electric company cars acquired before the rules enter into force, as no transitional arrangement is provided.

7. Employer contribution to the Family Burden Equalisation Fund (“Familienlastenausgleichsfonds”)

From 1 January 2028, the employer contribution to the Family Burden Equalisation Fund (FLAF) will decrease by one percentage point, from 3.7% to 2.7%.

In addition, the current exemption from the employer contribution obligation for employees aged over 60 is expected to be abolished from January 2028.

8. Monthly marginal employment threshold to remain at EUR 551.10

The monthly marginal employment threshold will not be adjusted in 2027 and will remain “frozen” at its current level of EUR 551.10.

9. Increase in the employer levy (“Dienstgeberabgabe” – DAG)

The employer levy will increase from 1 January 2027. The current rate of 19.4% will rise to 23% in 2027. A reduction to 21% is planned for 2030. However, the monthly contribution-base threshold will remain at EUR 826.65 in 2027, as in 2026.

10. Stricter rules for unregistered AMS benefit recipients working unregistered

A stricter rule will take effect as early as 1 September 2026. It applies where an inspection identifies unregistered workers who receive AMS benefits, such as unemployment benefit or hardship grant (“Notstandshilfe”). A special contribution equal to twice the combined employer and employee shares of unemployment insurance contributions is already imposed in such cases. From September 2026, however, the assessment period will increase from six to eight weeks.

11. Freezing of family, social and health insurance benefits

In addition to the changes outlined above, adjustments to numerous benefits will be suspended, including:

• Family allowance (“Familienbeihilfe”), including sibling and age-related supplements, the supplement for multiple children and the school-start allowance
• Childcare allowance (“Kinderbetreuungsgeld”)
• Family time bonus (“Familienzeitbonus”)
• Sickness benefit, rehabilitation benefit and gradual return-to-work benefit

According to the current status, the adjustments will also be suspended for 2028.

The following changes do not form part of the Budget Accompanying Act, but are also relevant for payroll in 2027:

12. Benefit in kind for employer-provided accommodation: new reference rates

Until now, the reference rates have been published by the competent ministry. Since this year, Statistik Austria has assumed this responsibility. The new reference rates have been available since 1 April 2026 and must be applied in payroll from 1 January 2027. The previous rates continue to apply until the end of 2026:

13. Subsidised partial retirement (“Geförderte Altersteilzeit”)

With effect from 1 November 2026, the ceiling up to which the subsidised wage compensation and subsidised non-wage labour costs are calculated will be reduced to 75% of the monthly maximum contribution base. (For 2026, this corresponds to a maximum contribution base of EUR 6,930 × 75% = EUR 5,197.50. The maximum contribution base for 2027 has not yet been determined.)

From 2027, subsidised partial retirement will be further restricted. The maximum entitlement period will decrease to four years in 2027, three and a half years in 2028 and three years in 2029.

The required periods of employment subject to unemployment insurance contributions, currently 804 weeks, for commencing partial retirement will be gradually increased over the coming years, reaching 884 weeks, or 17 years, from 1 January 2029. Secondary employment will only be permitted in exceptional cases. Employers should review planned partial-retirement arrangements at an early stage and take the amended requirements into account in workforce planning.

Our experts are happy to provide further information.