Understanding “Associated Entities” in the Employer-Sponsored Visa Landscape

In Australia’s employer-sponsored visa framework, the identity of the sponsoring entity is an important step for businesses operating through multiple entities.

Whether your organisation is sponsoring a worker under the Skills in Demand (Subclass 482) (SID) or Skilled Employer Sponsored Regional (Subclass 494) (SESR); or nominating a worker under the Employer Nomination Scheme (Subclass 186) (ENS) visa, a clear understanding of how “associated entities” operate is essential to ensuring compliance and the success of your application.

What Are “Associated Entities”?

The definition of an “associated entity” is contained in s 50AAA of the Corporations Act 2001 (Cth). In broad terms, one entity is an associated entity of another if:

• They are related bodies corporate (e.g. subsidiaries and holding companies)
• One controls the other
• Both are controlled by a third entity (e.g. they both have the same director/shareholder)
• One holds a qualifying investment and has significant influence over the other

An “entity” includes individuals, companies, partnerships, and trusts. While a trust itself isn’t a legal entity at common law, it is often treated as one for tax and other purposes.

Why Use Associated Entities?

Businesses sometimes use multi-entity structures to:

• quarantine financial or legal risk across different business arms
• operate service entities for back-office functions (e.g. payroll companies)
• facilitate the sale of specific business divisions.

One example is where a group of restaurants (each operated by separate legal entities) uses a payroll entity to sponsor a chef so that it has flexibility to place the chef across the various restaurants at the need arises.

Associated Entities and the SID and SESR visas

Under the SID and SESR frameworks, associated entities allow flexibility in employment placement, but with limits:

• The sponsoring entity must be clearly identified at the time of application. This entity bears the legal obligations under the sponsorship (see r 2.86 of the Migration Regulations 1994 (Cth))
• The visa holder may work for the sponsor or an associated entity if the sponsor is approved as a Standard Business Sponsor. Employees working for an Overseas Business Sponsor (“OBS”) must work for the OBS only
• Condition 8607 restricts the visa holder to working in the nominated occupation within the sponsor’s business or those of its associated entities

Associated Entities and the ENS visa

A requirement of the ENS nomination (in the Transition and Direct Entry streams) is that the nominee be employed “under the nominator’s direct control”.

Strictly interpreted, this would exclude employment by associated entities. However, the Department has adopted a broader policy, recognising that in corporate groups, employees may by employed by one company but work for an associated entity. This policy allows more flexibility for businesses using standard internal structures. A word of caution, however, is that the Department’s policy is more generous than the words of the legislation permit. The Department may change its policy at any time.

Adverse Information and Associated Entities

Both sponsorship and nomination applications require that there be no adverse information about the sponsor or persons/entities “associated with” the sponsor.

“Associated with” is defined in r 1.13B of the Migration Regulations and is at least as broad as the definition of “associated entity” in the Corporations Act, if not broader.

In practical terms, if any associated entity has a poor compliance history, it could affect the sponsor’s eligibility, even if the sponsor itself is compliant.

Conclusion

The use of associated entities offer real benefits in structuring business operations and employing overseas workers, but they also add complexity to sponsorship and nomination processes.

If your business operates through trusts, subsidiaries, or service companies, it is essential to get clear, early advice on which entity to use as the sponsor or nominator under the SID, SESR and ENS visa programs. If you require assistance, please contact Melissa Phan.