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457 Temporary Skilled Migration Income Threshold to increase to $49,330 from 1 July 2011

The contents of this article are correct as at 29 June 2011.

The Department of Immigration and Citizenship (DIAC) has announced an increase in the minimum salary payable to employees nominated under the subclass 457 visa scheme. Effective from 1 July 2011, the Temporary Skilled Migration Income Threshold (TSMIT) will be $49,330, up from the current TSMIT of $47,480.

The High Income Exemption, which allows employers to nominate workers (generally applicable in situations where the employee is nominated for a trade position or as a Cook or Chef) who do not meet the English language requirements (at least vocational English language skills), will remain effective after 1 July 2011. However the new minimum salary for this exception will be $88,410 per annum, increased from $85,090.

An additional threshold exists for ‘high-earning’ nominees, which allows employers to avoid demonstrating that the market salary requirement is satisfied. From 1 July, only employers offering a salary of over $180,000 will be exempt from demonstrating market salary rates.

Summary of income threshold changes, effective 1 July 2011:

$49,330

TSMIT

$88,410

High Income Exemption

$180,000

Exemption from demonstrating market salary rates

 

Background on Income Threshold Requirements

The income threshold requirement is one criterion that a standard business sponsor must satisfy for DIAC to approve their Nomination of an employee under the subclass 457 visa scheme.

This requires that the standard business sponsor pay their nominated employee a salary which is at least as high as TSMIT, which is set by regulations and indexed annually.

This criterion exists to ensure that overseas workers in Australia are provided a salary which allows them to be self-sufficient and to maintain a reasonable standard of living in Australia.

A separate (but related) criterion requires that the salary offered to the employee is at least as favourable as that offered to Australian workers who are employed in the same position. Where there are no Australians in the business employed in the exact same position, this is satisfied by showing that the employee’s salary is consistent with local market salary rates. The market salary rates criterion remains unaffected by the 1 July amendments.

Note that all figures referred to above are base salary amounts. A base salary is defined as the amount payable to an employee for their ordinary hours of work, which is exclusive of the following:

  • Superannuation

  • Incentive-based payments and bonuses

  • Loadings (for example, annual leave loading)

  • Monetary allowances

  • Overtime or penalty rates 

Also note that there is some limited discretion for DIAC to approve a nomination where the base rate of pay is below TSMIT, but only when the employee will receive additional payments (not counted in the base salary) which go towards their ability to support themselves while in Australia (for example, a living away from home allowance).  

Who do these changes apply to?

Nomination Applications

Changes to the income threshold requirements apply to all Nominations which are finalised on or after 1 July 2011, regardless of the date they are lodged.

To clarify, a Nomination lodged prior to 1 July but where DIAC only makes a decision after 1 July will be subject to the increased TSMIT. Such Nominations will be refused if the base salary is not higher than $49,330.

High Income Exemption Applications

Where an employer intends to rely on the High Income Exemption to nominate an employee whose English does not otherwise meet the subclass 457 requirements, the higher income threshold will apply to any Nominations decided on or after 1 July 2011. This is the case regardless of when the Nomination application was lodged.

In the case of the High Income Exemption, DIAC will also assess the salary at the Visa application stage. This is because English language requirements (including any exceptions to these requirements) are assessed as part of the Visa application stage.

Where a sponsoring employer has a nomination approved on the basis of a pre-1 July High Income Exemption threshold level, which does not meet the post-1 July threshold, two courses of action are available:

  1. The salary offered can be increased so that it satisfies the $88,410 threshold; or

  2. The employee manages to satisfy the general English language requirements

Are current 457 Visa Holders affected by the TSMIT changes?

The increase in TSMIT does not affect employees who have already been granted a 457 visa.

That is, DIAC will not require the salaries of current 457 visa holders to be increased in line with the new TSMIT from 1 July. This is because TSMIT is only required to be satisfied at the time that Nomination is finalised by DIAC.

However, employers should note that the related salary requirement which involves employment terms and conditions which are equivalent for 457 visa holder as for Australian employees in the same position, is an ongoing condition. This means that an employer, who increases the salary of Australian citizen and permanent resident workers, is also obligated to increase the salary of any 457 visa-holders performing that same job. This ongoing requirement remains unaffected by the 1 July changes.

If you have any questions concerning this article, please click this link to contact Visa Lawyers Australia.