The "Review of the Migration System Final Report" (Review Report) provides insight into a new migration strategy for Australia and proposes much needed reform in several areas. While the report is consultative and largely comprises of recommendations which will be clarified towards the end of the year, there are two key changes which will take effect on 1 July 2023:
- TSMIT (Temporary Skilled Migration Income Threshold)
will be increased to $70,000 –
Up until now, employers must afford TSS visa candidates a market salary rate at or above $53,900 (TSMIT). Historically, TSMIT was indexed annually, but it has not changed in over a decade. From 1 July 2023, the TSMIT will increase to $70,000. This change will not only impact employers who seek to nominate new skilled workers, but also existing skilled workers who face an imminent visa expiry date, which requires a new nomination to be submitted by their employer.
- Permanent residency pathway for "short-term"
stream TSS (subclass 482) visa holders – details of the new
arrangements are yet to be released.
Currently, TSS visa holders who work in positions which are classified in an ANZSCO occupation listed on the Short-Term Skilled Occupation List (STSOL) have no direct pathway to Australian permanent residency (PR) (unless exempt). On the other hand, occupations listed on the Medium and Long-term Strategic Skills List (MLTSSL) are generally eligible for PR after three (3) years. While the specifics are yet to be published, this is a welcome and much anticipated change to provide more certainty to visa holders in terms of their long-term prospects in Australia.
WHAT PRACTICAL IMPLICATIONS DO THESE CHANGES HAVE ON CURRENT AND PROSPECTIVE SPONSORING EMPLOYERS?
The most difficult aspect of the Review Report is the many unknowns at this stage. Having said that, our migration landscape is subject to a major overhaul towards the end of 2023, and the report's recommendations and objectives for the future would appear to address fundamental issues currently faced by employers and visa candidates.
There is a sense of uncertainty concerning the impact of the new TSMIT on lodged and pending applications post 1 July 2023. The assessment of TSMIT is a 'time of decision' criterion, so applications lodged between now and 1 July 2023 will be subject to the new TSMIT provisions unless they are finalised before this date. The last time TSMIT was increased in 2013, pipeline applications were refused unless they were updated during processing to demonstrate compliance with the new TSMIT criteria (ie through the provision of an updated contract reflecting an increased salary and market rate evidence). While updated documents and an increased salary could remedy the problem back then, it may not be as easy now for the following reasons:
THERE ARE TWO DISTINCT ASPECTS TO THE MARKET SALARY RATE REQUIREMENT:
- Employers must pay an overseas worker the market salary rate – that is the rate the employer pays, or would pay, an equivalent Australian citizen/permanent resident employee doing the same work in the same location; and
- The market salary rate must be at or above TSMIT.
The distinction between points 1 and 2 is important, and not always appreciated when employers determine an overseas worker's salary. The requirement is not to pay the overseas worker at or above the TSMIT amount (currently $53,900), but rather, to pay the market salary rate – and that rate must be at or above the TSMIT amount. Therefore, the upcoming TSMIT increase not only mandates an employer to pay an extra $10K-$20K on top of the existing salary nominated in respect of the overseas worker, but potentially also to increase the salary of the equivalent Australian currently working for the employer. The problem is compounded where regional employers are concerned, as these areas typically experience lower salary figures compared to metropolitan areas. In this regard, the Review Report proposed a 3-tier approach to assessing TSS applications in the future:
- Tier 1: a 'light touch' high salary cohort (presumably at or above the Fair Work High Income Threshold amount)
- Tier 2: a 'mid-level' cohort to which the new TSMIT provisions apply
- Tier 3: a 'lower-wage' cohort in sectors experiencing persistent shortages and increased risk of exploitation and displacing Australian workers with similar skills. It appears that aged and childcare workers may fall within this tier, and that the TSMIT provisions would not apply to Tier 3 applications
Further, the market salary requirement also applies to permanent employer sponsored (subclass 186) visas.
AN INCREASED TSMIT ALSO NOW IMPACTS THE LABOUR MARKET TESTING (LMT) REQUIREMENT (WHICH DID NOT EXIST IN 2013).
A key component of LMT is to publish the proposed salary in the text of the actual advertisement (or a salary range if earnings are below $96,400), and there cannot be many discrepancies between this figure and the salary figure being offered to the visa candidate.
As evidence of LMT is a 'time of application' requirement (without which the application will fail), the new changes pose some curious questions and will directly impact employers who have already met the very proscriptive LMT requirements, and incurred costs associated with advertising and lodging the nomination application (which includes a large up-front cost in the Skilling Australians Fund (SAF) levy). It is hoped that the Department will implement transitional arrangements to minimise the impact.
The Review Report alludes to a reform of the current LMT framework, but there has been no definitive response to the recommendation in the review that it be abolished. It is speculated that the LMT requirement might be absent from Tiers 1 and 3 applications, in addition to Jobs and Skills Australia playing a greater role in identifying labour market needs, but at this stage it is unknown.
WHERE TO FROM HERE?
Unless LMT has already been undertaken and the application is of a low-risk nature (in which case it may be finalised before 1 July 2023), we recommend employers to hold off lodging any new applications until after 1 July 2023. Doing so avoids the risk of complications during processing, where one would otherwise be caught by the apparent disconnect between the new TSMIT amount and LMT requirements.
In all other cases where the proposed salary is below $70,000, the options are:
- Proceed to lodge the application, noting the risk post 1 July 2023
- Increase the nominated salary to align with the new TSMIT – and ideally, avoid offering the overseas worker a salary of $70,001
- Hold off and wait until details of the changes are released
NEW ZEALAND CITIZENS
Another change being implemented on 1 July 2023 concerns the eligibility of New Zealand citizens to apply for Australian citizenship. Though this change is not included in the Review Report, it provides a direct citizenship pathway to New Zealanders who hold a Special Category (subclass 444) visa (SCV) – ie those who arrived in Australia after 26 February 2001.
Put simply, the citizenship criteria require applicants to have lived in Australia for a period of at least four (4) years, during which time they held a permanent residency visa for at least 12 months (subject to any significant absences from Australia).
THE PRACTICAL EFFECT OF THE UPCOMING CHANGES MEANS:
- All New Zealand citizens holding a SCV will be considered permanent residents for citizenship purposes – the relevance of this change is that previously, New Zealand citizens had to become "official" permanent residents through a permanent residency visa first (ie skilled or family pathway etc), and hold that visa for at least 12 months, before they could become eligible for Australian citizenship. This is no longer the case
- New Zealand citizens granted a SCV before 1 July 2022 will have their period of permanent residence for citizenship purposes (ie the 12-month requirement) backdated to 1 July 2022 – this means that they are taken to have already "served" the 12-month period as a "permanent resident", and if they have lived in Australia for four (4) years or more and meet the remaining eligibility requirements, can apply for Australian citizenship on 1 July 2023
- New Zealand citizens granted a SCV for the first time on or after 1 July 2022 will be considered a permanent resident for citizenship purposes from the date of their SCV grant
WHAT ABOUT THE PARTNERS/SPOUSES OF NEW ZEALAND CITIZENS?
A person who is in a relationship with a New Zealand citizen (and not a NZ citizen themselves) is ordinarily eligible for a 5-year visa (subclass 461). But what happens if the New Zealand citizen partner becomes an Australian citizen?
In these circumstances, the subclass 461 visa holder is no longer eligible to apply for another subclass 461 visa, as they no longer meet the eligibility criterion of being in a relationship with a New Zealand SCV holder. There is a silver lining though, as this cohort would be eligible for a partner visa once their subclass 461 visas expire, on the basis of their relationship with the New Zealand citizen turned Australian citizen – therein providing permanent settlement prospects in Australia (as opposed to being left in an ongoing temporary visa situation).
Practice tip: Any New Zealand SCV holders who have subclass 461 visa partners should consider the timing of their Australian citizenship applications, as a citizenship grant would impact any pending subclass 461 visa applications, resulting in a refusal. Make sure your partner's visa status is secure before proceeding to apply for Australian citizenship.
