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VIENNA — Austria is set to make continued employment beyond the statutory retirement age more financially attractive through a new tax-advantaged “Aktivpension” scheme approved by the National Council on September 23.
The reform aims to encourage older workers to remain in the labor market by introducing tax exemptions and reducing pension insurance contributions for eligible employees and self-employed individuals.
According to tax adviser and social insurance expert Wolfgang Höfle of TPA, the centerpiece of the initiative is a new “activity allowance” that will exempt up to €15,000 of annual earnings from taxation. The benefit corresponds to a monthly tax-free amount of up to €1,250 and applies only during months in which an individual is actively employed.
Austria’s statutory retirement age is currently 65 for men. For women, the retirement age is being gradually increased depending on their date of birth. Women born on or before December 31, 1963, reach retirement age at 60, while the retirement age for women born from July 1, 1968 onward will also be 65.
The new tax allowance will be available to people who defer claiming their pension, with no minimum number of insurance years required. However, pension recipients who continue working will only qualify if they had accumulated at least 40 insurance years for men or 34 insurance years for women at the time they retired.
The minimum requirement for women is scheduled to increase gradually from 2028 and reach 40 insurance years by 2033.
Höfle noted that individuals who do not meet the insurance-year threshold may benefit from opting for a partial pension instead. Recipients of partial pensions will not be subject to the minimum insurance-year requirement.
The rules also provide a pathway for existing pensioners who began drawing an old-age pension before July 1, 2026, but did not have the required insurance years. Missing contribution periods can be earned retrospectively through employment subject to compulsory social insurance after retirement.
Employers to Verify Eligibility
Employees will be able to claim the activity allowance through their employers. Companies will be expected to verify the plausibility of information provided by workers, particularly whether the statutory retirement age has been reached.
For workers who defer retirement, employers should obtain confirmation from the Pension Insurance Institution confirming the postponement. For pension recipients, pension award notices should be retained and the documented number of insurance months reviewed.
The Finance Ministry has already published a set of frequently asked questions on the new allowance.
Lower Pension Contributions
Besides the tax incentive, the Aktivpension package reduces pension insurance contributions for older workers.
For regular and freelance employees, the employee share of pension insurance contributions will be eliminated entirely, while employers will continue paying the full employer contribution.
Until the end of 2026, both employees and employers will continue to pay half of the pension insurance contribution if the statutory old-age pension is deferred.
Self-employed workers will also benefit. Under the reform, nearly half of the statutory pension contribution will be waived. For individuals insured under Austria’s GSVG system, the contribution rate is scheduled to fall from 18.5% to 10.18% from 2027, with 8.32 percentage points no longer payable.
Unlike the tax allowance, the exemption from pension insurance contributions does not require pension recipients to meet a minimum number of insurance years.
Opportunities for Family Businesses
TPA also highlighted potential implications for family-run businesses. Spouses working in a family enterprise may, under certain circumstances, move beyond unpaid family assistance and enter into paid contractual arrangements.
Depending on the nature of the work, such arrangements may take the form of regular employment, freelance service contracts or self-employment.
“The ideal situation is one in which the assisting spouse can earn tax-free and pension contribution-free income, while the self-employed spouse can deduct personnel costs as business expenses,” Höfle said. He added that all arrangements should be properly documented through written agreements reflecting the actual working relationship.
The government hopes the measures will help address labor shortages, retain experienced workers and create stronger financial incentives for Austrians to remain economically active after reaching retirement age.
- source: vienna.at/picture: pixabay.com
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