- Government Will Limit Fringe Benefit Tax Exemption, Increase Migration Quotas to Remedy Skills Shortages in Regional Australia
- June 8, 2012
- Law Firm: Fragomen Del Rey Bernsen Loewy LLP - New York Office
The Australian government announced several initiatives in its Fiscal Year (FY) 2013 budget that will affect employers of foreign workers. Fewer foreign workers will qualify for fringe benefit tax exemptions. The budget also responds to the shortage of skilled local workers in regional Australia by increasing the number of permanent employment-based visas available in Fiscal Year 2013, revamping two key permanent residence programs and creating a streamlined path to permanent residence for temporary workers.
Strict New Limits on Tax Exemption for Living-Away-From-Home Allowances and Benefits
Effective July 1, 2012, foreign workers will no longer be able to claim tax exemptions for housing and food benefits unless they have established a residence in Australia for their own use and their employer transfers them to another location in the country. This is similar to the rules on taxable housing and food benefits that apply to Australian workers.
Currently, foreign workers’ housing and food benefits are generally exempt from both income and fringe benefit taxes. This concession delivers significant tax savings to foreign workers and their employers and has played an integral role in many Australian employers’ recruitment and retention strategies. The practical effect of the change, which was proposed late last year, will be to increase foreign workers’ tax liabilities and reduce their take-home pay unless their employer increases their gross pay to offset the higher tax liabilities.
Increase in Overall Migration Quota; New Initiatives to Remedy Skills Shortage
For FY 2013, Australia will increase the overall number of permanent migration visas by 5,000, to 190,000. The total number of employer-sponsored migration visas will be 129,250, an increase of 3,400. The new allocation will be in effect from July 1, 2012 to June 30, 2013.
The Australia government will continue to focus on attracting skilled workers to regional and low population growth areas. In FY 2013, there will be 16,000 RSMS visas available, the same as this Fiscal Year. As we have reported previously, on July 1, the government is reorganizing the Employer Nomination Scheme (ENS) and the Regional Sponsored Migration Scheme (RSMS) to create a simplified path to permanent residence for foreign workers holding a subclass 457 visa, the principal temporary work visa category. The ENS is Australia’s standard form of employer-sponsored permanent residence. The RSMS is a special program that allows employers in regional and low population growth areas to fill vacancies they have been unable to fill with local workers.
RSMS applications will continue to receive top processing priority in FY 2013. The budget also allocates AUD 1.3 million over the next two years to improve the application process for the Employer Sponsored Permanent Residence Program, and AUD 5 million over the next three years to pilot distance English language learning programs through the National Broadcast Network to reach foreign nationals living and working in regional areas.
Restructured Penalties for Employer Compliance Violations
Other measures announced in the budget will restructure Australia’s employer compliance penalty system, introducing graduated tiers of sanctions for employers that undertake actions that would cause a person to breach their visa conditions or refer for work or hire a foreign national who does not have work rights. Sanctions will range from warnings and infringement notices with financial penalties to civil penalties and criminal prosecution for the most serious breaches. The government will run an education campaign to ensure employers are aware of the new arrangements.
Other Immigration Initiatives
The budget will also implement proposed new fees on July 1, 2012. There will be a charge of AUD 60 to place a visa label in a foreign national’s passport where a label is not required by Australian authorities, and an AUD 60 fee to submit a paper application where an online option is available. Each fee will increase to AUD 70 in 2013. There will also be a new surcharge for visas of longer duration and visa extensions sought from within Australia.
Also beginning July 1, 2012, the government will increase the medical cost limits known as Significant Cost Thresholds, for visa applicants to AUD 35,000, up from AUD 21,000. Regardless of a visa applicant’s financial status, if the estimated cost of treating the applicant’s health condition exceeds the Significant Cost Threshold, the visa application will be denied unless a health waiver is available for that particular visa. The threshold will not apply to humanitarian visa applicants.