By Sasko Markovski

It is common for many employers to provide staff with the opportunity to enter into salary packaging arrangements which can provide benefits to maximise any available tax concessions.

Where the staff member is on a subclass 457 visa, or another applicable temporary visa, it is important for employers to understand how DIAC looks at these types of benefits both at the time an application is submitted and thereafter as part of the ongoing sponsorship obligations of the employer.

At the time an employer nominates an overseas worker for a subclass 457 visa, information about the base salary and total earnings of the individual needs to be provided. Total earnings calculations can include wages, the amounts applied or dealt on the employees behalf (for example allowances, additional superannuation contributions), and the agreed money value of non-monetary benefits (for example annual health insurance premiums).

Contingent payments such as bonuses, commissions and overtime cannot be included, nor can superannuation payments made under the Superannuation Guarantee Charge Act 1992.

In some circumstances, it is now possible for an employer to set a subclass 457 visa holder's base rate of pay below the Temporary Skilled Migration Income Threshold (TSMIT), which is currently AUD49,336, provided that the market salary rate for the nominated role is above this threshold and the total earnings of the individual are at or above the market salary rate. The exception to this relates to individuals whose subclass 457 visa was granted prior to 14 September 2009, as their base rate of pay cannot fall below the minimum salary level which applied to them prior to that date.

It is important that accurate information is provided to DIAC at the time of application as it is this information which DIAC subsequently refers to when monitoring and auditing activities take place. As part of any monitoring activity, DIAC can request all records relating to the payment and value of such benefits included in the total remuneration calculations. Relevant records can also be obtained from the Australian Taxation Office.

Even an inadvertent breach of a sponsorship obligation can result in an unsatisfactory monitoring outcome. More serious breaches can result in administrative sanctions and/or financial penalties can be imposed upon a business sponsor causing severe business interruption and impacting the employer's ability to sponsor further overseas staff.

Tips to ensure immigration compliance when packaging salaries are:

  • contingent or one off payments should not be included into earning calculations when preparing nomination applications.
  • ensure all salary packaging arrangements with subclass 457 visa holders are well documented and records are readily available in the event of a DIAC audit.
  • identify staff who had visas granted prior to 14 September 2009 and don't drop their base salary below the applicable minimum salary level.
  • where the total earnings of an individual are subsequently reduced from that initially approved by DIAC, a new nomination is generally required to be submitted.

If you have any questions regarding salary packaging, please don't hesitate to contact Sasko Markovski via phone +61 2 8224 8509 or email smarkovski@fragomen.com or your usual Fragomen representative.

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.