Australia: New training levy to replace 457 visa training benchmark for business sponsors

Last Updated: 11 May 2017
Article by Yunn Chen

Budget reveals levy on businesses sponsoring on the new TSS visa

The budget announced yesterday has revealed plans to impose a levy to raise $1.2billion from businesses looking to sponsor overseas employees under the new Temporary Skill Shortage ('TSS') visa. The TSS visa will replace the highly politicised 457 program in March 2018.

Businesses will incur a levy of either $1200 or $1800 per year per sponsored temporary employee, depending on the turnover of the business. Over the course of 4 years (the maximum duration a TSS visa can be granted for) businesses can expect to fork out $4800 or $7200 for each of their sponsored TSS visa holders. These fees are in addition to the upfront costs of lodging a Standard Business Sponsorship and Business Nomination, the first two steps of the employer sponsorship program, as well as any professional fees for immigration lawyers or agents.

It appears that the employers will be charged the levy up front for the duration of the visa requested. It is at present unclear whether the Department will refund these fees should the employment relationship cease.

Those looking to sponsor employees on the permanent skilled visas (Employer Nomination Scheme (subclass 186) visa or a permanent Regional Sponsored Migration Scheme (subclass 187) visa), will face a cost of $3000 or $5000. A breakdown of the levy applicable to businesses are as follows:

Businesses with turnover of less than $10 million per year:

  • An upfront payment of $1,200 per visa per year for each employee on a Temporary Skill Shortage visa
  • a one-off payment of $3,000 for each employee being sponsored for a permanent Employer Nomination Scheme (subclass 186) visa or a permanent Regional Sponsored Migration Scheme (subclass 187) visa.

Businesses with turnover of $10 million or more per year:

  • An upfront payment of $1,800 per visa year for each employee on a Temporary Skill Shortage visa
  • a one-off payment of $5,000 for each employee being sponsored for a permanent Employer Nomination Scheme (subclass 186) visa or a permanent Regional Sponsored Migration Scheme (subclass 187) visa.

Funding the Skilling Australian Funds

The levies received from sponsoring businesses will be contributions to the new Commonwealth-State Skilling Australians Fund. The fund aims to support up to 300,000 apprentices, trainees, pre-apprenticeships in high-demand occupations over the next 4 years.

Whilst this is positive news for the vocational training and education sector, it is questionable whether the government's target of $1.2billion in levies is realistic. With the Department's overhaul of the 457 program in April, limiting the occupations available for sponsorship and restricting the employer sponsored visa eligibility criteria, the number of new skilled visa applications is expected to drop drastically. The new TSS visa fees of $1150 for a two-year visa or $2400 for a four-year visa (up from $1070 for the 4-year 457 visa) is also likely to detrimentally affect demand for the new visa.

Replacing the 457 visa 'training benchmarks' & costs to businesses

Importantly, the levies imposed will replace the current 'training benchmarks' which require sponsoring employers to have either spent at least 2% of the payroll of the business to an industry training fund, or spent at least 1% of the payroll of the business in training their own employees.

The current 'training benchmarks' scheme takes into account any training expenditure by a business in training Australian citizens and permanent residents, apprentices, trainees or recent graduates, allowing business to include salaries of these employees in the 1% requirement. The new levies however, do not.

It appears that businesses already directly supporting apprentices or trainees will need to double up in their contributions to training young Australians - by incurring the training costs as well as the levy to the government if they wish to sponsor employees on the TSS visa. For certain businesses, this could represent additional costs in the tens or hundreds of thousand. These measures are contrary to the government's intent to encourage the up-skilling of local Australians, and may be unjustly punitive to businesses who already have a good track record of contributing in the form of apprenticeships and training.

Job Creation or Labour Market Crisis?

The government expects that these new budget measures will, in Treasurer Scott Morrison's words, skill more Australian to secure jobs. In reality, the occupations Australia most needs may not be able to be filled by an Australian, whether because lack of experience of qualifications, or because of market demand. The occupations of Chief Executive Officer or University Lecturer are examples of occupations where overseas skills may bring greater value to Australia than securing Australian jobs. Likewise, as Australia's prosperity as a country increases, unskilled labour positions driving primary and secondary industries may remain unfilled in the absence of overseas employees.

With these changes coming into effect, businesses face the tough decision of sourcing critical skills from the pool of Australian candidates, incurring the high costs of employer sponsorship for visas, or where possible, outsourcing jobs overseas. In this aspect of Australia's budget announcements, Australia's global competitiveness suffers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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