Drawbacks of a 457 visa vs. Permanent Residence (PR)

Generally Speaking for employment, family and travel reasons it is advisable to seek Permanent Residence and indeed Australian citizenship as soon as you can. Whilst applicants often don’t have choice – this article considers some of the drawbacks of  temporary residence and also benefits of holding a temporary 457 visa.

Summary of 457 Visa drawbacks

1. You can only work for your sponsoring employer. You cannot to have any secondary employment. If your employment is terminated, you have 28 days (or longer depending on the circumstances) to find a new employer (must be an approved sponsor), apply for another visa if possible or leave Australia.

2 years on a 457 visa

2. Under the 1 July 2012 changes , you will only be able to apply for permanent employer sponsored (PES) visas through your employer if you have been employed with the proposed sponsor for 2 years before applying. This is a change from the present rule of working for 2 years on a 457 visa but only 12 months with the proposed sponsor (see ENS blog for full changes)

3. Your partner (and other dependents) will have unrestricted work rights but may find it hard to get career-orientated jobs as employers usually prefer citizens/ permanent residents

Other temporary status impact

Family issues

4.  School fees in NSW and ACT are payable at overseas students rates. Previously up to $5500 per child in NSW and $13,500 per child in ACT. These figures should be confirmed with the relevant state authorities.  Other states (including QLD) do not treat 457 visa holders differently from permanent residents.

5. Your children will be treated as “overseas students” if they go to university in Australia. If you are from the UK, they may also be treated as ‘overseas students’ back in the UK too unless they meet a 3 year residence requirement, even if British citizens. You need to check this in detail.

6. As your children get older (especially once they turn 18), it may be harder to include them in a permanent visa application unless they are deemed ‘dependent applicants’. They could end up having to go home once deemed ‘independent’ even if the rest of the family gets permanent residence unless they are able to apply for another visa type;

7. Children born to you in Australia will not be Australian citizens by birth as parents will only be temporary residents.

8. FIRB restrictions on buying property. To buy an established property, FIRB will usually grant approval as long as you have more than 12 months remaining on your work visa.

9. No eligibility for Medicare – even though you pay the Medicare levy -other than limited reciprocal healthcare schemes for some nationalities (UK and Ireland mainly). Health insurance will be more expensive. However once you apply for a PR visa you are normally eligible for Medicare.

10. No entitlement to social security or welfare benefits. This includes benefits paid to mothers of new babies, and things like the first home buyers grant.

11. No automatic entitlement to permanent residence (PR). Bear in mind the usual problem is that the employer is reluctant to nominate persons for PR. Often PR applicants are expected to pay fees and charges, as employers consider PR more of a benefit to the applicants. You must also bear in mind that a death, illness or divorce/separation of the main visa holder before PR is granted could leave some or all family members in a very difficult visa situation. Regular changes in PR policy also can impact when having to work for an extended time on 457 especially under the new rules of working at least 2 years for the PR sponsor

12. Some professions and occupations (Police, army etc) are closed to those without permanent residence;

13. You cannot sponsor relatives for permanent residence or sign an Assurance of Support for migration purposes;

14. There is no legal bar on obtaining credit (e.g. loans, credit cards) but you will likely find it harder to get one without permanent status, although this attitude is changing;

 457 visa benefits

15. The main benefit of the 457 visa program if you are in Australia, is that it gives you the possibility of permanent residence through your employer if you do not have formal qualifications or for some reason you have difficulties having your skills assessed for a skill assessment. This is usually the most common pathway to PR chosen by 457 visa holders as it is less complicated once you meet the time qualification;

16. Gives you the opportunity to judge whether you want to stay with the sponsor before applying for permanent residence. You can currently move sponsors easily but beware of the new rules on 1 July 2012 that you must be with an employer for 2 years before you can be sponsored for permanent residence from a 457 visa!

17. Depending upon your partner’s skills and experience they partner will have unrestricted work rights (but see above no.3);

18. Superannuation

457 visa holders are eligible to recover their superannuation (less tax) when they leave Australia;

 19. LAFHA

Although in general 457 holders pay the same taxes as Australians (for little or no benefit) there have been a few tax breaks available to temporary residents. The most notable one until recently is Living Away from Home Allowance (LAFHA).

 Changes to LAFHA  ***See latest 457 blog for up-date on LAFHA

However changes proposed by the ATO will see these payments come to an end on 30 June 2012 as the taxation office seeks to better regulate these concession payments. Amidst the raft of structural recommendation on expenditure justification and income tax treatment, there is a section that directly relates to temporary residents.

It aims to limit the availability of LAFHA payments to those immigration visa holders who have an established home in Australia and are living and working away from this location.

At this stage the concession is thought to cease being available to international workers who do not meet the new requirements from June 30. This means that there is less than two months to go before the ATO applies its reviewed alterations to existing legislation.

There is no news from Treasury as to when the draft legislation in respect of the LAFHA changes will be released or whether a transitional rule will be introduced. This is astounding given the proposed changes will apply from 1 July 2012!

Future planning

For international workers planning on travelling to Australia for employment, they must assume that the changes will apply from 1 July 2012. This could give them a reason to re-evaluate their circumstances and consider the prospects offered by a more permanent visa solution.

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