Migration highlights from the 2012-13 Federal Budget - how will this affect your business?

by 15 May 2012

Employer sponsored permanent residence, additional visa charges, employer sanctions and Living Away from Home Allowance (LAFHA)

Teresa Liu, Partner and Chris Barton, Partner – Employment Law, Fragomen

The 2012-13 Federal Budget revealed a boost of 5,000 places to the 2012-13 migration program, to raise the overall program to 190,000. Employers are the main beneficiaries with the skilled migration category increased to 129,250 places in what will be the largest permanent migration intake since 1945.

The employer sponsored permanent residence program will  benefit from additional funding of AUD1.3 million to enable DIAC to implement major reforms to the program commencing 1 July 2012. Those reforms will reorganise two key employer-sponsored permanent residence programs, the Employer Nomination Scheme (ENS) and the Regional Sponsored Migration Scheme (RSMS). The reorganised programs feature a simplified path to permanent residence for foreign workers holding a subclass 457 visa, the principal temporary work visa category. With the expected rise in permanent applications being made as a result of the reforms to LAFHA on 1 July, this additional funding will be welcomed by business.

Regional migration remains a focus with the RSMS expected to deliver 16,000 skilled migrants to regional areas in 2012/13. Further initiatives for regional Australia include:

  • ensuring applicants for permanent regional migration visas continue to receive the highest level of processing priority,
  • delivering a streamlined RSMS pathway for existing 457 visa holders through the reforms to the employer sponsored permanent residence program, and
  • a AUD5 million virtual English tuition pilot to be delivered via the National Broadband Network to support new migrants living in regional Australia with a distance learning package that complements the Adult Migrant English Program.

There will also be ‘Significant cost’ reforms to visa health criteria. Under current arrangements, visa applicants will fail the health criteria where the estimated costs of treating a health condition are above the Significant Cost Threshold currently set at AUD21,000. In order to better reflect the current health costs, from 1 July 2012 the threshold amount will be increased to AUD35,000. These reforms followrecommendations by the Joint Standing Committee on Migration on the Migration Treatment of Disability.

Business should also plan ahead for additional charges that will apply from 1 July 2012 for ‘optional services’ of visa label evidencing and paper lodgements (where electronic lodgement is available). There will also be a surcharge for longer duration visas and further visas sought from within Australia, to take effect in July 2013. These additional charges follow from DIAC’s Visa Pricing Transformation announced in the Mid-Year Economic and Fiscal Outlook in late 2011 which is estimated to provide a revenue gain of AUD67 million over the next four years.

As foreshadowed by Minister Bowen following the release of the Howells Review in July 2011, reforms to the employer sanctions regime will be introduced later this year establishing graduated tiers of employer sanctions, including for employers that refer for work or hire a non-citizen who does not have work rights or undertake actions that would cause a person to breach their visa conditions. Estimated to generate revenue of AUD1.7 million over the next three years, the revised sanctions will range from warning and infringement notices with financial penalties to civil penalties and criminal prosecution for the most serious breaches.

Finally, after much speculation the transitional arrangements for Living Away from Home (LAFH) allowance tax concessions have been announced with indications from Treasury that transitional arrangements will only apply to those temporary residents (such as 457 visa holders) who:

  • are maintaining a home in Australia and are living away from that home, and
  • have employment arrangements for LAFH allowances and benefits in place prior to 7.30pm on 8 May 2012.

Temporary residents who meet the above criteria will not be subject to the new 12 month restriction on LAFH expenses which will come into effect from 1 July 2012, but under the transitional rules will be able to claim an income tax deduction for such expenses up until 30 June 2014. For 457 visa holders, it therefore appears that only a select few will be able to meet these transitional rules.  Treasury estimates that these reforms to the LAFH allowance tax concessions will have a gain of AUD683.3 million over the next 4 years. The technical detail and draft legislation is not yet available and will need to be closely read when released, in order to specifically clarify the new LAFH allowance and transitional arrangements.

From an employment law perspective, employers will have to carefully review existing employment contracts and other arrangements in assessing the options open to 457 and other temporary residents. Retention strategies, remuneration options and policies with regard to permanent residence, amongst other things, will have to be considered in managing employee concerns.

If you would like further information, please don’t hesitate to contact either Teresa Liu via phone on +61 2 8224 8518 or email tliu@fragomen.com or Chris Barton via phone on +61 2 8224 8520 or email cbarton@fragomen.com.

 

 

 

Teresa Liu

 

Partner

 

T: +61 2 8224 8518

 

E: tliu@fragomen.com

  www.fragomen.com

 

 

 

Other topics:

  • Centre for International Employment and Migration (CENTIEM) – a Fragomen initiative and business unit within Fragomen Australia www.centiem.com