Budget Accompanying Act 2027-2028: Final Version Brings Unexpected Changes

The measures that have been discussed and reported on extensively in recent weeks are now final in substance. Publication in the Federal Law Gazette is expected within the coming days.

Key Measures Adopted

• Abolition of tax-exempt teleworking allowances effective 1 January 2027.
• Revision of the Family Bonus Plus allocation rules: following a child’s fourth birthday, the bonus must be split between the parents either on a 50:50 or 75:25 basis, effective 1 January 2027.
• Reduction of the employer contribution to the Family Burdens Equalisation Fund (FLAF) from 3.7% to 2.7%, effective 1 January 2028.
• Abolition of the FLAF contribution exemption for employees over the age of 60, effective 1 January 2028.
• Additional extraordinary increases in the maximum social security contribution base, amounting to €150 per month in 2027 and €50.10 per month in 2028. The maximum contribution base is to be rounded to whole euros.
• The general unemployment insurance (ALV) exemption for individuals aged 63 and above will be abolished as of 1 January 2027. Correspondingly, the exemption from the IESG surcharge for this age group will also be repealed.
• In connection with the abolition of the reduced unemployment insurance contribution rates for low-income earners from 1 January 2027, a multi-year transitional regime will be introduced. Contributions will gradually increase until reaching the standard rate of 2.95%. Unlike originally planned, the transition will apply not only to existing employment relationships but also to new hires. Notably, different transitional contribution rates will apply to existing and newly established employment relationships, with new employment relationships reaching the standard rate of 2.95% more quickly.

The transition rules are set out below. For employment relationships already in place on 31 December 2026, contribution rates will increase gradually over a longer period. In contrast, employees hired after that date will transition to the standard rate more rapidly, resulting in a higher contribution burden for new entrants compared with existing employees.

Transitional Unemployment Insurance Contribution Rates

The adopted legislation provides for different transitional contribution schedules depending on whether the employment relationship was already in place on 31 December 2026 or commenced thereafter.

Employment Relationships Existing on 31 December 2026

Employment Relationships Commencing after 31 December 2026

The final legislation therefore introduces a differentiated transition model. While employees in existing employment relationships will benefit from a gradual increase over several years, employees hired after 1 January 2027 will transition to the standard unemployment insurance contribution rate of 2.95% considerably faster. As a result, the employment start date will become a key factor in determining the applicable ALV contribution burden during the transition period.

Transitional Rules for Apprenticeships

Special transitional arrangements will also apply to apprenticeship relationships (Lehrverhältnisse) that are currently subject to the reduced unemployment insurance contribution rate.

Apprenticeships Existing on 31 December 2026

For apprentices in the former 0% contribution tier, the employee unemployment insurance (ALV) contribution rate will increase gradually as follows:

• 2027: 0.5%
• 2028: 1.0%
• From 2029 onwards: standard contribution rate of 1.15%

Apprenticeships Commencing after 31 December 2026

For apprenticeship agreements starting on or after 1 January 2027, the transition period will be shorter:

• 2027: 1.0%
• From 2028 onwards: standard contribution rate of 1.15%

The adopted rules therefore follow the same principle as the transitional arrangements for regular employment relationships: existing apprenticeships benefit from a more gradual increase, while newly established apprenticeships will move to the standard unemployment insurance contribution rate more quickly. Although the standard contribution rate for apprentices remains lower than that for other employees, employers should nevertheless take the higher contribution burden into account when planning apprenticeship costs from 2027 onwards.

New Compared with the Original Draft Legislation

The final version of the legislation includes several noteworthy amendments that were not part of the original draft:

• The marginal earnings threshold (“Geringfügigkeitsgrenze”) will remain frozen at €551.10 throughout 2027, rather than being adjusted in line with the usual annual indexation mechanism.
• For phased-retirement arrangements (Altersteilzeit) commencing on or after 1 November 2026, the salary compensation reimbursable by the Public Employment Service (AMS) will be capped at 75% of the maximum social security contribution base, instead of the full maximum contribution base.
• Eligibility for unemployment benefits will cease once an individual meets the requirements for a corridor pension (“Korridorpension”), effective 1 January 2027.

These changes highlight the government's continued focus on fiscal consolidation. In particular, the freezing of the marginal earnings threshold and the restrictions on AMS reimbursements for phased retirement arrangements are expected to increase costs for certain employers, while the new corridor pension rule further limits access to unemployment benefits for older workers.

Link to the adopted Budget Accompanying Act 2027-2028: https://www.parlament.gv.at/dokument/XXVIII/BNR/198/fnameorig_1770846.html

Amendment to the Employer Tax Act

The amendment to the Employer Tax Act (Dienstgeberabgabegesetz) introduces an increase in the flat-rate employer levy applicable to marginal employment relationships.

Effective 1 January 2027, the levy will rise from 19.4% to 23% where an employer’s total monthly remuneration paid to all marginally employed workers exceeds 1.5 times the marginal earnings threshold.

The increase is intended to be temporary. Under the adopted legislation, the levy rate is scheduled to be reduced again to 21% from 1 January 2030.

For employers that rely on marginal employment arrangements, this measure will result in higher employment costs from 2027 onwards and should be factored into workforce planning and budgeting decisions.

Link to the adopted amendment to the Employer Tax Act: https://www.parlament.gv.at/dokument/XXVIII/BNR/199/fnameorig_1770848.html

Additional Note: Taxable Benefit for Company Electric Vehicles from 2027

As previously reported, a draft amendment to the Benefits-in-Kind Regulation (Sachbezugswerteverordnung) proposes the abolition of the current exemption from taxable benefits for privately used company electric vehicles.

Under the draft regulation, the monthly taxable benefit would amount to:

• 0.375% of the vehicle’s acquisition cost (capped at €180 per month) in 2027
• 0.625% of the vehicle’s acquisition cost (capped at €300 per month) from 2028 onwards

According to the draft, the new rules would apply to payroll periods ending after 31 December 2026. As a result, from 1 January 2027, the taxable benefit would not only apply to newly registered electric vehicles or vehicles newly allocated to employees, but also to electric vehicles that have already been made available to employees prior to that date.

Employers operating electric vehicle fleets should therefore closely monitor further developments, as the proposed changes could have a significant impact on payroll taxation and the overall attractiveness of company electric vehicle arrangements.

Please note: This measure is currently based on a draft regulation and has not yet been formally enacted.

In summary, the new measures bring little simplification and are primarily driven by budgetary considerations, creating additional administrative burdens for businesses.