457 changes a ‘face-saving nod to nationalism’

Legal immigration experts claim that the changes to the 457 visa are a ‘token gesture to nationalism’, giving the appearance of cutting off visas for foreign workers without actually changing anything.

“It helps with nationalist feelings people have for our country and it gives the appearance of trying to help the unemployed, but in reality it simply means employers will have to spend more money justifying getting foreign workers, in application fees and background checks,” said an immigration solicitor who wished to remain anonymous.

“It’s not going to lead us to becoming the clever economy we thought we were going to get under Malcolm Turnbull.”

The solicitor said the changes to the 457 visa are unlikely to be revolutionary.

“Many of the 216 jobs taken off the list barely exist anymore,” he said.

It seems as though the list was due for a clean out. Some of the occupations removed from the list include: blacksmiths, gunsmiths, antique dealers, futures traders, park rangers, saw makers and repairers, sail makers, shoe-makers, funeral directors and golfers.

“How many people do you know that needs a blacksmith?  We don’t have lighthouse keepers anymore, it’s all automatic, so it makes sense that lighthouse keepers were taken off the 457 list.

“Divers, golfers, shoe-makers: many of the occupations taken off the 457 list do not have any significance at all to the economy and do not attract many 457 visa holders.”

R&D managers were also culled from the 457 visa list, “a silly decision”, said Aristotle Paipetis, Principal Solicitor for Visa Lawyers Australia.

“You’ve got universities and research institutions which need R&D. I don’t know who put together the list of culled occupations but I don’t think that decision was properly thought out.”

Actors were also removed from the list.

“Of the 216 occupations removed, I think you’ll find few if any of those workers had been sponsored over the last four years,” Paipetis said.

Only 9% of 457 holders impacted by change

You wouldn’t have thought from the fuss kicked up this morning by CEOs and founders over Turnbull’s decision to tighten the condition around 457 work visas that only 8.6 per cent of foreign workers are in jobs that would be excluded under the new visa system.

But there they were on ABC and Sky News panels talking about the insecurity facing modern Australian businesses & companies, claiming the changes to the visa conditions are forcing them to consider moving abroad to countries where their obligation to pay a cost of living wage or salary isn’t nearly as compulsory as it is here.

I interviewed Mike Cannon Brookes a year or two ago for an AFR story that never made it to print in which he threatened to move his entire marketing arm overseas if he couldn’t get the foreign workers he needed locally. (I have posted the full article here for context). At the time I thought I was on the money, and that the pressure to ensure Atlassian had adequate number of workers to fill the local skills shortage was legitimate, and perhaps it was / still is.

But it is worth considering that companies get tax breaks and benefits for employing foreign workers. For example, the Living Away From Home Allowance (LAFHA) – which is tax deductible for employers – used to be calculated as part of the employment packages for foreign workers. before it was cut from the 457 visa in 2012.

The Living Away From Home Allowance is paid by the employer to the employee to compensate for any additional expenses incurred and disadvantages suffered because the employee’s duty requires them to live away from their normal residence.

Instead of paying a cash allowance, employers can provide fringe benefits by either reimbursing their food, accommodation and other costs incurred at the new location or by providing the food and accommodation themselves.

The LAFHA is income tax-free and should not be included as assessable income in workers’s tax returns. Conversely, workers cannot claim deductions for expenses covered by the LAFHA. However, employers may be required to pay Fringe Benefits Tax on the value of the allowance or benefits provided.

The Living Away From Home Allowance was cut from the 457 visa in 2012.

As of 2012, employees can only access the LAFHA for a period of 12 months. Prior to 2012  no time limits applied, (there are other changes to the LAFHA which I won’t get into here but you can read comprehensively about on the ATO website)

The LAFHA  sounds alright, if it wasn’t calculated into the cost of that worker’s salary, effectively a subsidy on a wage which in many cases is often lower than the market rate or ward wage.

The LAFHA allowance is tax deductible for companies, “a government subsidy by any other name”, according to our anonymous solicitor.  It also means that employees only pay tax on their base salary.

“Say a worker is recruited to Australia on an $80,000 package, of which $30,000 makes up the LAFHA allowance, no one is paying tax on that $30k” says  Paipetis.

This benefit was cut from the 457 visa in 2012, meaning employers would need to factor accomodation, food and travel costs into their employment packages and are no longer able to claim a tax deduction for the difference.

Paipetis said the 457 scheme as it previously operated imposed quite onerous obligations on sponsors. In many cases it requires employers to pay 457 visa holders a particular minimum salary which in some cases is “above and beyond” what an Australian would be paid.

“For example the market rate for a project administrator in Adelaide is $45,000 but for a worker on a 457 sponsor, employers are not allowed to pay anything below $53,900,” he said.

“Another example is cooks. There are many places in Australia where the market rate is $45,000-$50,0000. A 457 employee had to be paid at least $53,900 excluding super.”

That being said, Paitpetis says he has no doubt that some employers were and are using visa schemes to avoid hiring Australian workers, but said it is difficult to assess the percentage of exploitative employers and sponsors.  

Another immigration solicitor – who wished to remain anonymous – calculated around 10-15% of employers were exploiting the 457 visa scheme in order to avoid paying local wages.

“They are the ones who killed the goose who laid the golden egg,” the solicitor said.

Paipetis said even with the new 457 changes, it is all but impossible to eradicate 457 visa exploitation.

“There will always be companies and individuals that find ways to overcome these new laws and exploit them,” he said.

457 changes don’t address local unemployment

The changes to the 457 visa do little, if anything, to address the medium and long-term unemployed.

“Another issue which all governments have to consider is that if you’re going to basically putting a halt to the importation of foreign workers – particularly specialist workers, although that has demeaned itself over the years – you need to find better ways to train people locally to  counteract the need for foreign workers,” our anonymous solicitor said.

“The competition for labour has to go up, that might be more expensive for the economy, but I’m a lawyer, not an economist,” he said.

It also ignores the idea that many new skills coming out of new industries will not be found locally, and we will need to import those skilled workers to Australia to train and educate the rest of the work-force to ensure our skills base remains globally competitive.

An immigration solicitor who wished to remain anonymous recalled that when Malcolm Turnbull was first elected Prime Minister, he said he wanted to bring home our Silicon Valley workers to foster a local ‘Ideas Boom’, but said he’s not going to get them back here without any proper incentives.

“They’ve got to be the teachers of other people in Australia, whether that is in terms of dealing with business, the law, medicine, commerce, technology and any other relevant professions and trades undergoing innovation or change,” he said.

While I am not altogether against Turnbull’s decision to tighten conditions around the 457 visas, we have yet to hear any plan about how he intends to use these changes to address local unemployment and skills shortage.

Moreover, if industries are indeed having issues attracting skills worker, they should be investing greater resources into building up a local skills base, even if it means they’re getting 457 workers to fill the gap in the meantime.

What point is there in continuing to do business in this country if you’re not also going to contribute to bolstering the local education, knowledge and skills base?

Yes, Australian workers should come first. Yes, we should allow skilled migration to fill the jobs shortage. But it shouldn’t be because they’re cheaper. Migrants should earn the same wage as everyone else. I also don’t see why they should be punished through taxation for being a skilled migrant.

The cost of being a skilled migrant

Migrants pay a higher marginal tax rate than local residents.

Workers with children face paying around $5000 a year, per child to attend public school.

Australia is currently home to around 189,770  temporary skilled workers, costing companies up to $10,000 per person to get into the country and up to $7000 for a partner visa.

Skilled workers on the 457 or other visas face up to $10,000 in legal fees and are required to jump through “bureaucratic hoops” to satisfy the requirements of the Immigration Department.

With compulsory two to three month waiting periods between jobs, those with offers on the table  risk losing the position because they cannot start straight-away.

“There are improvements and then there are some curious changes which I don’t think are going to be of assistance to companies with skills shortages,” Paipetis said.

The solicitor says the government needs to explain why some people have different work rights to others, and why they may not be equal when you look at various groups.

“There might be justifications, it could have to do with the purpose of the visa, it might be industry specific, or it could be geographically dependent,” he said. “But the government has not done a good job of explaining its reasoning for why the system is the way it is.”

Migration programs must be tailored to reality

The solicitor says Australia’s immigration system needs to become one that caters for the idiosyncrasies of the individual, employers, and the needs of particular regions.

“If you want to get a specialist foreign worker, you have to look after them along with their partners and children,” he said. “Even if they are here on a temporary visa, we should be encouraging them to think about staying here even if their intention was only to do it for a few years, and their ability to work and finance their futures should reflect that.”

For example spouses who move with their partner on a 457 dependent visa have unlimited work rights. The same goes for those on a Permanent Residency dependent visa. But foreigners who visit Australia  on student visas are limited to 40 hours a fortnight.

“The policy behind that scheme is that as an international student you have to pay your own way,” Paipetis said. “The aim is not for you to study and work, you need your own resources to do that.”

Given that many Australians work full time and study or work part time and study full-time, I don’t see why those who are studying at Australian universities from overseas shouldn’t have the same rights to be able to support themselves, rather than relying on a parental overseas trust fund, or having to take out a loan ahead of time in your country of origin to afford your living expenses Down Under.

Limiting the hours one can work only further encourages foreign workers to take under-the-counter wages, or worse.

It is clear the 457 was due for a spring clean. But what is also clear is that both migrant workers and employers continue to face significant financial and regulatory insecurity.

For example, in a story I wrote for SBS, I interviewed a relationship manager for a global corporate who had lived in Australia since the age of 17 before being ‘deported’ from Australia after seven years despite the fact that she was earning millions of dollars annually from gas and mining clients, because her occupation was removed from the skilled migrants list, and despite the fact that she was two points away from earning permanent residency. She moved to Singapore, where she continues to work for the same company, only now the millions are going to the Singaporean economy, instead of our own. How does that decision to remove her from the country after so many years make any kind of economic sense?

Australia should continue to welcome skilled migrants, despite this week’s ‘face saving’ announcement.

It needs to be easier to business in this country, but we also need safeguards to ensured that the value of labor, whether local or foreign is not being undervalued. 

(If you cannot afford to pay the Australian minimum wage, you shouldn’t be allowed to stay in business).

While the changes to the 457 may have been made with the best interests of local workers in mind I’m not sure it will do anything to prevent companies from hiring foreign workers, nor will it address unemployment or the local skills shortage.

Until these issues are addressed, Australia will continue to operate as a backwater economy.

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Claire Connelly is working on her first book, How The World Really Works, a guide to recognising rhetorical red flags and immunising yourself against bullshit. You should definitely buy it when it comes out. A podcast of the same name will also be launching in the coming months.