Australia First? A Summary of the 457 Visa Changes

On 18 April 2017, Prime Minister Malcolm Turnbull announced the staged abolition of the Subclass 457 visa under the rhetoric of “Australia first”.

The changes came with very little warning. Some have said that the changes are cosmetic and will have little impact on aspiring visa applicants and sponsors. Many have called it a political manoeuvre.

In this post, we set out a summary of the changes, based on materials so far available (bearing in mind that we haven’t yet seen the legislation and the devil is always in the detail) and also provide some commentary on the changing visa landscape.

The 457 Changes

The 457 visa changes will occur in four stages:

  • Immediate changes to the 457 visa which came into effect on 19 April 2017;
  • Changes to the 457 visa on 1 July 2017;
  • Changes to the 457 visa on or before 31 December 2017;
  • The replacement of the 457 visa with a news Temporary Skills Shortage (TSS) visa in March 2017. The TSS visa will have two streams: the Short-Term stream and the Medium-Term stream.

Changes will also be made to permanent employer nominated visas to align with the abolition of the 457 visa.

Changes on 19 April 2017

Three changes were made as follows:

  • the list of occupations which sets out the occupations which may be nominated for a 457 visa, known as the Consolidated Skilled Occupations List (CSOL) and which comprised 651 occupations, was replaced with two lists (totalling 435 occupations) as follows: (a) the Short-term Skilled Occupation List (STSOL); and (b) the Medium and Long-term Strategic Skills List (MLTSSL);
  • visas for occupations on the STSOL may be granted for 2 years; visas for occupations on MLTSSL may be granted for 4 years;
  • certain occupations on the STSOL and MLTSSL have been caveated, meaning that additional requirements must be met in order to successfully nominate those occupations.

The Immigration Department says that these changes do not affect current 457 visa holders, as one would expect.

However the changes will affect 457 visa applicants whose applications have been lodged but unfinalised as at 19 April 2017 and 457 applicants who lodge applications after that date. The Department says that these applications cannot be granted if they do not meet the new requirements. The Department has also “generously” offered refunds of application fees for those who find that their nominations or visa applications are no longer able to be approved.

Changes on 1 July 2017

The changes include:

  • The STSOL and MLTSSL will be further reviewed.
  • The English language exemption will be removed. Currently, an exemption applies if an applicant’s salary is over $96,400.
  • Training benchmarks will be made clearer in policy. It is unclear what this will entail.
  • The provision of penal clearances will become mandatory.
Changes on or before 31 December 2017

Two changes have been announced:

  • The Department will have the power to collect Tax File Numbers for 457 visa holders for data matching with ATO records.
  • The Department will commence publishing details of sponsors who have been sanctioned for failing to meet sponsorship obligations.
Changes in March 2018

The 457 visa will be abolished and replaced with the new TSS visa.

As stated above, the TSS visa will have two streams with the following distinctives:

Short Term Stream

  • 2 year visa with one further “option” to renew onshore.
  • Occupations must be nominated from STSOL, plus additional occupations will be available for regional employers.
  • English setting remains as per the current IELTS average score of 5.0, with a minimum of 4.5 in each category.

Medium Term Stream

  • 4 year visa with possibility of ongoing renewal onshore.
  • Pathway to permanent residency after three years. Currently, the transition stream only requires two years.
  • Occupations must be nominated from MLTSSL, plus additional occupations will be available for regional employers.

Generally, for both streams:

  • Applicants will need two years’ relevant work experience.
  • Labour market testing will be mandatory (except where a Free Trade Agreement applies).
  • Penal checks will be mandatory.
  • The Temporary Skilled Migration Income Threshold (TSMIT) (currently $53,900) will apply.
  • The salary paid to the nominee must be “market salary”.
  • A non-discriminatory workforce test will be introduced.
  • The training requirement on sponsors will be strengthened.
Changes to Permanent Visas

Changes on 19 April 2017

  • The CSOL was replaced with the STSOL and MLTSSL, with 216 occupations removed.
  • The Department has not stated that the change will affect applications currently being processed.

Changes on 1 July 2017

  • There will be a further review of the occupation list.
  • IELTS required of 6.0 in each band. Query whether this will apply to the transition stream (which currently requires IELTS of 5.0 in each band).
  • Age limit of 45 to be introduced for Direct Entry stream.

Changes on 31 December 2017

  • The Department will have the power to collect Tax File Numbers for 457 visa holders for data matching with ATO records.
  • The Department will commence publishing details of sponsors who have been sanctioned for failing to meet sponsorship obligations.

Changes in March 2018

  • Only occupations on the MLTSSL may be nominated, with additional occupations available for regional employers.
  • TSMIT will apply.
  • Salary must be “market salary”.
  • Three years’ relevant work experience is required, which would apply regardless of whether the applicant applies under the Direct Entry or Transition streams.
  • Maximum age is 45. It is unclear whether any concessions will apply.
  • The training requirement on nominators will be strengthened.
Comments

Effect on Unfinalised 457 Applications

We are not convinced that the application of the new STSOL and MLTSSL (plus caveats) to existing, unfinalised applications is entirely lawful. This will need to be tested. Convention would, at least, dictate that the law which applies ought to be the law in existence at the time of making the application, not a new law which is announced mid-way through processing.

The “bait” of withdrawing and seeking a refund will mean that applicants may lose the opportunity to test the validity or lawfulness of the changes. Particularly for applicants who are onshore, it may be worthwhile allowing the application to be refused so that appeal jurisdictions may be enlivened. It will also mean more time for the applicant to source alternative visa options if one is not immediately available.

If another visa application is available, applicants may consider deploying those options before withdrawing the application or allowing it to be refused.

Care should be taken and advice sought before applicants blindly take the offer of a refund.

It must be noted that the Department also says nothing about the professional fees an applicant may have incurred or the cost of lost opportunity. A refund of Departmental fees is only a small part of the equation.

Interestingly, the Department makes no mention of the fact that the change to the occupation list will have a similar effect on unfinalised permanent visa applications. No refund appears to have been offered and it seems that the Department (until it says anything further) is prepared to continue processing these unfinalised applications under the old occupation list. One cannot have it both ways, and we wonder whether this is an indication that the Department itself is not entirely convinced of the lawfulness of refusing unfinalised applications by applying the new occupation lists.

Caveats

The Minister is supposed to specify a list of occupations for the purposes of the 457 regulations. We query whether the caveats, some of which are quite detailed and impose requirements beyond the mere specification of occupations, is beyond power.  It appears to be law-making by executive order.

Some of these caveats say that the position must be located in a regional area. Some of them say that the position must be within a business which employs 5 staff members and turns over $1 million. How far can these caveats go? Could they impose further requirements entirely irrelevant to the occupation, e.g. specifying that a business can only sponsor into that occupation provided its staff are all union members? Or that the business must be located in the Western Suburbs of Perth? The possibilities of extra-legislative requirements are endless and therefore potentially beyond law-making power.

Uncertainty

In July this year, there will be a further review of the STSOL and the MLTSSL. This is of concern. It means that nominations and visa applications lodged under the current STSOL and MLTSSL, if unprocessed before 1 July (which is a possibility) could be affected if:

  • Further occupations are removed;
  • Occupations are further caveated.

Applicants should be warned about this uncertainty.

There is quite a bit of detail still lacking in terms of the changes yet to be implemented. What does a “strengthened” training requirement look like? Will labour market testing take a different form? Are all English language concessions to be removed?

Also, whilst the Department says that existing 457 visa holders are unaffected, what happens in March 2018 when the permanent visas are changed? Would the 457 visa holders still be allowed to transition under the old laws?

We will need to await the text of the legislation. In the meantime, the system remains in a state of flux.

Graduates

Education services remains one of Australia’s largest export sector. As points-tested skilled migration has tightened, one option for permanent residency that did remain for many overseas students who had completed their studies in Australia was to seek employer sponsorship, including under the 457 visa. The two-year work experience requirement under the new TSS visa would disqualify most of these students.

Further, the shrinking of the occupation list will also be a real constraint.

It may be that many students seeking migration outcomes following their studies will be required to return home.

We wonder whether this will make Australia a less attractive place for post-secondary studies. What will be the flow-on economic impact?

Will this Benefit Australia?

In our view, the concerns about the 457 visa displacing Australian jobs is unfounded. In fact, one could argue that the 457 mechanics have been successful in responding to the job market – as it should! The evidence is that in a slowing economy, Australian industry’s reliance on 457 visas has decreased.

Protectionism never benefits the economy in the long term.

Whilst the changes to the 457 visa are propounded amidst the rhetoric of Australia first and the protection of Australian jobs, ultimately, businesses will suffer. Those jobs which the Australian Government seeks to protect may ultimately become the casualties.