This GMS Flash Alert reports on new measures in the recent Budget that introduce a training levy on businesses that sponsor a foreign employee on a four-year visa and for permanent residence.
The 2017-18 Budget1 handed down by Australia’s federal government on 9 May 2017 included the introduction of a new training levy framework, which will underpin the new Temporary Skill Shortage (TSS) visa and replace the existing training benchmarks that currently have to be met by employers accessing the Temporary Work (Skilled) Subclass 457 visa program. (For prior coverage of the Budget, see GMS Flash Alert 2017-088, 11 May 2017; for prior coverage of the visa changes, see GMS Flash Alert 2017-079, 27 April 2017.)
Employers that nominate foreign employees for the TSS visa and certain permanent skilled visas will have to pay the new training levy.
The introduction of the new levy will result in an increase in costs for employers that sponsor employees for temporary or permanent residence, more than offsetting any potential cost savings from the removal of the current training expenditure obligations. They should therefore take these changes into account when planning to move employees to Australia for work purposes – given the timeframe around the changes and the costs, there could be planning opportunities for employers bringing/sending employees to Australia.
From March 2018, businesses with annual turnover of AUD 10 million or more will be required to make an up-front payment of AUD 1,800 per visa year for each foreign employee sponsored on a TSS visa. In addition, they will also pay a one-off levy of AUD 5,000 for each foreign employee sponsored for Australian permanent residence.
The levies apply at a lower rate of AUD 1,200 per visa year and AUD 3,000 respectively, for businesses with annual turnover below AUD 10 million.
The new training levy will be contributed into a new “Skilling Australians Fund.” The revenue generated from this fund, which is estimated at AUD 1.2 billion in the Budget’s forward estimates, will be used to support Australian skills development and the take-up of apprenticeships and traineeships.
The table below illustrates the potential cost impact of the training levy on a business (based on annual turnover thresholds) that sponsors a foreign employee on a four-year visa and subsequently for permanent residence.
|AnnualTurnover (AUD)||Calculation of Costs (AUD)||Up-front payment of levy (AUD)||Additional levy for PR (AUD)||Total Cost Impact* (AUD)|
|Year 1||Year 2||Year 3||Year 4|
|10 million or more||1,800||1,800||1,800||1,800||7,200||5,000||12,200|
|Below 10 million||1,200||1,200||1,200||1,200||4,800||3,000||7,800|
Note: All figures are in AUD
As noted earlier, the introduction of the new levy will result in an increase in costs for employers that sponsor employees for temporary or permanent residence.
* The additional costs highlighted should be considered from a broader context including other announced changes. As an example, there are reduced tax costs for employers for tax equalised high-income expatriates as a result of the removal of the 2% Temporary Budget Repair Levy from 1 July 2017.
Other measures in the Budget include an increase in visa fees and a restatement of visa reform measures previously announced by the government on 18 April 2017. (For prior coverage of the visa changes, see GMS Flash Alert 2017-079, 27 April 2017.) These are summarised as follows:
Key Considerations, Next Steps for Employers
Employers should consider factoring in the additional costs (arising from the training levy and labour market testing (including external job advertising)) when considering their future resourcing options, ahead of the implementation of the new TSS visa in March 2018. Also, while in the past employers may have applied for the maximum period of the visa, they may wish to consider applying for a shorter term, noting the training levy is imposed on a “per year” basis of the visa.
Where possible, employers may consider bringing forward their recruitment and sponsorship plans or their plans to convert current 457 visa holders to permanent residence prior to March 2018 to avoid the training levy for this population.
1 For the Budget speech and related documents, see: http://www.budget.gov.au/.
AUD 1 = EUR 0.678
AUD 1 = USD 0.736
AUD 1 = GBP 0.572
AUD 1 = JPY 83.72
This article is excerpted, with permission, from “Budget 2017-18 – New Training Levy to Underpin Temporary Skill Shortage (TSS) Visa,” in Migration Newsflash (10 May 2017), a publication of the KPMG International member firm in Australia.
* Please note that KPMG LLP (U.S.) does not offer immigration services.
The information contained in this newsletter was submitted by the KPMG International member firm in Australia.
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