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Proposed Changes to the Subclass 457 Temporary (Skilled) Work Visa Scheme

The contents of this article are correct as at 21 December 2013.

In December 2012 the Department of Immigration and Citizenship (“DIAC”) released a discussion paper proposing a range of changes to the subclass 457 visa program. These measures have not yet been made into law, however the Government has now introduced the bill into parliament with an expectation of it being made law by 1 July 2013.

Below is a summary of the twelve (12) proposed changes and their potential impact on Australian businesses.

Measure 1: Strengthening the Employer Attestation provision


The Migration Regulations 1994 (“the Regulations”) currently provide that in order for an Australian employer to become a 457 sponsor, the employer must attest that they have a strong record of, or a demonstrated commitment to employing local labour and non-discriminatory employment practices.

Under existing legislation, the attestation requirement is non-binding and DIAC has no capacity to refuse a 457 sponsorship application if the attestation is not genuine. In addition, DIAC currently has no legal capacity to take action against approved sponsors who fail to comply with the attestation.

Proposed Measure and Impact

It is proposed that the current attestation would become an ongoing, binding commitment that requires employers to demonstrate that they do not discriminate in favour of overseas workers.

The commitment would apply from the time of sponsorship approval and for the duration of the sponsorship agreement.

DIAC would enforce the commitment through sponsorship monitoring. An adverse finding against an employer could result in the imposition of sanctions, and could also be taken into account as adverse information in any subsequent application to renew Sponsorship.

Measure 2: Training Benchmarks


As part of the current 457 sponsorship process, the employer is required to demonstrate to DIAC that:

  • They meet specified benchmarks for the training of Australian citizens and permanent residents (if trading for 12 months or more); OR
  • They have an auditable plan to meet the benchmarks (if trading for less than 12 months)

The training benchmarks are currently specified as follows:

  1. Recent expenditure, by the business, to the equivalent of at least 2% of the payroll of the business, in payments allocated to an industry training fund that operates in the same industry as the business; OR
  2. Recent expenditure, by the business, to the equivalent of at least 1% of the payroll of the business, in the provision of training to employees of the business

Proposed Measure and Impact

In response to legislative difficulties, the following changes have been proposed:

  • The training benchmarks would become a binding requirement, rather than a commitment
  • An approved 457 sponsor must keep any associated records (in relation to training)
  • If the employer has been trading for less than 12 months, the employer must:
    1. Provide an auditable plan to meet the training benchmarks and
    2. Make an ongoing commitment to continue to meet the training benchmarks for the duration of their sponsorship
  • An approved 457 sponsor seeking ongoing approval through new sponsorship, or variation of sponsorship, will be required to demonstrate that they met their commitments to training throughout the term of their previous sponsorship

The proposed measures are aimed at both strengthening the provisions that relate to training benchmarks, as well as the ability of DIAC to sanction sponsors who do not meet this requirement.

Measure 3: Genuineness Criterion


Under existing provisions employers are only required to certify that the tasks of the nominated position correspond to the tasks of an occupation eligible under the 457 program. There is no ability for DIAC to consider the veracity of the certification provided, and it is not possible for DIAC to refuse a 457 nomination where they have concerns about the occupation. This includes instances where a position has been “dressed up” to meet an appropriate Australian and New Zealand Standard Classification of Occupations (“ANZSCO”) classification.

The proposed measures also aim to address concerns that the 457 program is being used to secure the entry or stay of persons, such as a family member or associate, rather than to alleviate a genuine skill shortage. Currently, DIAC has no power to reject an application on this basis.

Proposed Measure and Impact

DIAC proposes to introduce a "genuineness" criterion in the assessment of 457 nomination applications to ensure that the nominated position and surrounding circumstances are genuine.

This would include:

  • The delegate to be satisfied that the tasks of the nominated occupation correspond to the tasks of an eligible occupation; and
  • The delegate to be satisfied that the position associated with nominated occupation is genuine.

Some factors that a case officer may take into account include:

  • Whether the terms and conditions of employment are sufficient to attract a qualified person locally;
  • Whether the tasks of the position correspond to the tasks of the nominated occupation;
  • Whether the nominated position fits broadly within the scope of the activities and scale of the business.

The proposed measures would allow DIAC to refuse a 457 nomination where there are integrity concerns.

Measure 4: Amendments to the terms of an Approved Sponsorship


Currently there is no restriction to the number of 457 workers which a company can nominate once a sponsorship is approved.

There is no capacity for DIAC to intervene in cases where an employer is using the program beyond its stated policy intent as a program to address skill shortages.

Proposed Measure and Impact

It is proposed that sponsors will be required to adhere to an agreed number of nominated positions for the duration of their sponsorship, or a “nomination ceiling”. Effectively, a sponsor will only be able to nominate a specified number of 457 workers.

If required, sponsors will be provided with an option to amend the number of nominated positions.

The measure would apply from the date of implementation. Current 457 sponsorships approved and active prior to the change will continue to be valid until date of expiry.

Measure 5: Strengthen Assessment of Generalist Occupations.


The occupations of Program or Project Administrators (ANZSCO 511112) and Specialist Managers NEC (ANZSCO 139999) have been identified as occupations of integrity concern in the 457 visa program. As the tasks and duties of these occupations (as per ANZSCO) are very general, there are concerns that the occupations may be misused to “dress up” lower skilled occupations, or to facilitate the stay of a temporary visa holder who does not have the formal qualifications required for the nominated position.

Proposed Measure and Impact

The following measures have been proposed in relation to the occupations of "Program and Project Administrator", "Specialist Managers" and certain other generalist occupations:

  • Limit the circumstances in which these occupations may be nominated; and
  • Require subclass 457 visa applicants nominated in these occupations to undertake a skills assessment with VETASSESS

Specifically, it is proposed that in industries where a clear alternative occupation exists, then a generalist occupation would be excluded. For example, as the occupation of "Construction Project Manager" exists on the CSOL, there is limited utility in continuing to allow the occupation of "Program or Project Administrator" to be open for nomination for construction project manager positions.

Measure 6: Strengthening the Market Rate Provisions


The current Regulations provide that a sponsor must employ 457 visa holders on equivalent terms and conditions that are, or would, be provided to an Australian working in an equivalent role or position:

  • Where there is an Australian worker employed by the sponsor in an equivalent role, the market salary rate for the nominated position is based on the terms and conditions of that worker.
  • Where there is no equivalent Australian worker, the employer is required to satisfy the Department that the terms and conditions of employment are appropriate for that location and industry and result in earnings above the Temporary Skilled Migration Income Threshold (“TSMIT”).

In addition, current arrangements provide that if a sponsor nominates annual earnings of $180 000 or more, there is no requirement for the nominated salary to be assessed against market salary rates.

However, it is DIAC’s view that current market salary rate provisions are not sufficient to ensure equitable remuneration arrangements or that Australians are not disadvantaged.

Proposed Measure and Impact

In response to the above concerns, DIAC has proposed the following measures to be implemented:

  • Expanding market rate provisions beyond the particular workplace to that workplace’s regional locality
  • Increasing the market salary assessment exemption threshold from A$180,000 to A$250,000

The proposed measures aim to change the market rates provisions to ensure that workers on 457 visas are not used to undermine the employment conditions of Australian citizens and permanent residents.

Measure 7: Undesirable Employment Relationships


Existing 457 sponsorship obligations include Regulation 2.86 – “Obligation to ensure primary sponsored person works or participates in nominated occupation, program or activity”. The obligation requires that the primary sponsored person is employed as an employee of the sponsor.

The wording of the Regulations do not currently prohibit “undesirable employment arrangements” that were not intended to be permissible within the 457 visa program. Examples include on-hire arrangements and those resembling independent contractor arrangements.

Proposed Measure and Impact

In response to the above concerns, DIAC has proposed the following measures to “tighten” the sponsorship obligation in Regulation 2.86:

  • Prohibit on-hire arrangements that fall outside approved Labour Agreements
  • Prevent sponsors from engaging visa holders under arrangements that resemble independent contracting arrangements, thus avoiding the provision of employee entitlements (noting independent contractor arrangements are permissible for Subclass 457 visa holders in certain specified occupations)

Measure 8: Strengthen the Obligation not to Recover Certain Costs


The current 457 sponsorship obligation in Regulation 2.87 – “Obligation not to recover certain costs from a primary sponsored person or secondary sponsored person”, requires approved sponsors not to recover certain costs from primary or a secondary sponsored persons (i.e. main visa holder or family members).

However, the obligation only relates to the "recovery" of costs from visa holders. It does not prevent sponsors from requesting visa holders to pay these costs up front, thereby avoiding the act of "recovery".

Proposed Measure and Impact

It is proposed that Regulation 2.87 be strengthened to ensure that approved sponsors are solely responsible for meeting certain costs associated with becoming a sponsor, and not pass these costs, in any form, onto a sponsored person.

Measure 9: Prevent Potential for Misuse of the English Language Salary Exemption


Under current arrangements, to be granted a 457 visa an applicant must demonstrate that they meet the English language requirement.

Applicants who are required to have a specific level of English ability to obtain licensing or registration for their nominated occupation, must demonstrate that they have that level of English. Other visa applicants must demonstrate that they have achieved a score of five in each of the test components of an International English Language Testing System (IELTS) test, or be exempt.

However, there are concerns that the current exemptions are open to misuse. For example, an exemption is currently available to applicants who nominate a trade occupation, and whose guaranteed earnings will be at least A$92,000 per annum. It is currently open to an applicant who applies on this basis to be granted a subclass 457 and then move on to a new sponsoring employer who nominates them in the same occupation, but at a salary that is below $92,000. In this case a new visa application is not required so English language ability is not assessed.

Proposed Measure and Impact

In order to address the above concern, it is proposed that an additional criterion be introduced at the nomination stage to consider the visa applicant’s English language ability.

Measure 10: Terms of Sponsorship Amendments for Overseas Business Sponsors and Start-up Businesses

Proposed Measure and Impact

It is proposed that the following terms of sponsorship approval will be introduced, in order to address current concerns relating to overseas business sponsors and start-up businesses:

  • The sponsorship term for an overseas business will be for the term of the project (up to three years) or 12 months, whichever is more
  • The sponsorship term for a start-up business will be 12 months

In effect, the proposed measures will reduce the period of approved sponsorship for overseas businesses and start-up businesses to ensure that the overseas business sponsorship is used for genuine temporary purposes (e.g. to meet contractual obligation) and will provide greater risk assurance with respect to start-up businesses, which are at a higher risk of failure than more established businesses.

Measure 11: Mandatory Online Lodgement of Subclass 457 Applications

Proposed Measure and Impact

It is proposed that all subclass 457 sponsorship, nomination and visa applications must be lodged online using DIAC’s new eLodgement facility.

Currently, all other skilled visa programs (e.g. Skilled Migration, Employer Nomination Scheme (ENS) and Regional Sponsored Migration Scheme (RSMS)) are lodged electronically using DIAC’s eLodgement.

Measure 12: Minor Technical Amendments to Clarify Existing Provisions

Proposed Measure and Impact

The following changes have been proposed in order to clarify ambiguity within the 457 visa program regime:

  • Clarifying the need for a direct employer-employee relationship
    Unless covered by a specified exemption, the wording of the Regulations will be amended to show it is expected that there is a direct employer-employee relationship between the 457 sponsor and the visa applicant.

  • Requiring a visa applicant to be the subject of a valid approved nomination
    Under current legislation, it was possible to lodge a “blank” 457 nomination that did not specify a proposed visa applicant. The legislation will clarify that visa applicants must be the subject of an approved nomination which has not ceased.

  • Improving the ability to make a timely assessment of a Subclass 457 visa applicant’s skills
    Under some circumstances, the case officer is required to contact the visa applicant for further information before a decision is made, even though it may be clear that the applicant does not meet the visa requirements. The proposed measures will aim to address this issue.

  • Extending the Visa Application Charge (VAC) refund provisions
    Currently, it is possible for a visa applicant to seek a refund for the VAC for their visa application, when the nomination that is associated with their application is refused. However, there is no such provision in the case where the nomination application is withdrawn. The proposed measures will aim to address this issue by expanding the refund provisions.

We will update our website with further information as it becomes available. If you would like any assistance with a Sponsorship, Nomination or Visa application under the subclass 457 visa scheme please feel free to contact us.