Training Benchmark Changes for Employer Sponsors from 1 July 2017

To be approved as a Standard Business Sponsor for the 457 Program employers must show they have met one of the two training benchmarks.

The training benchmarks are also relevant when applying for permanent residence under the Employer Nomination Scheme (ENS).

Important changes were introduced to the training benchmarks on 1 July 2017 - this article explains how the changes will impact employers.

Benchmark A - Payments to a Training Fund

This involves paying 2% of payroll to an industry training fund. From July 2017 payments may be made to one of the following:
  • Industry training fund
  • Fund managed by recognised Industry Body
  • Scholarship fund operated by Australian TAFE or University

The following types of expenditure are now not eligible:
  • Funds operated by RTOs or private individuals
  • Funds paying commissions or offering refunds if application fails
The main impact of this change is that the previous practice of private education providers accepting payments for Benchmark A will be discontinued. Many of these providers would pay commissions to migration agents referring clients.

Benchmark B - Expenditure on Training Australians in the Business

This involves spending 1% of payroll on training Australians in the business. From July 2017 payments may include:
  • Formal courses of study + associated costs (eg travel)
  • RTOs delivering face-to-face training which contributes to formal qualification
  • eLearning or training software
  • Apprentices, trainees or recent graduates
  • Training officers - must be sole role
  • Attending conferences for CPD

The following types of expenditure are now not eligible:
  • On-the-job training - previously, structured on-the-job training could be counted in some circumstances
  • Training not relevant to business' industry - it is not clear how closely related the training must be to the industry
  • Training of principals or family members - previously, training of family members could be counted providing it was also made available to other employees
  • Induction training
  • Salaries of staff attending training
  • Membership fees - previously allowable
  • Books, journals or magazine subscriptions - previously allowable
  • Conferences for purposes other than CPD
  • Hiring a booth at trade show, conference or expo

It appears that payment of external providers to deliver training for Australian employees, is excluded unless it leads to a formal qualification. This would form the bulk of the training expenditure of most businesses and so many will need to restructure their training to comply with the new Benchmark B.

Calculation of Payroll

As a general rule, payroll includes:
  • wages and salaries as per state payroll legislation, and
  • payments made to contractors or subcontractors if the work completed is related to services or products provided by sponsor
If the employer does not have a payroll they would count Directors' salaries, fees and drawings, or the profit of the business.

Timing of Training Activities

Payroll and training expenditure must be for the same period.

Previously, businesses operating for 12 months or more were required to demonstrate this expenditure in the 12 month period prior to lodgement. From July 2017, this expenditure may be for the 12 months prior to lodgement, or previous full financial year - this should help employers to gather relevant information and documentation.

Start-up businesses operating for less than 12 months will be required to show they have an auditable plan to meet these benchmarks.

Acacia's Expertise

Many employers might now find it difficult to meet the new training benchmarks. Please call our Corporate Hotline on +61 2 9230 0488 to ask how Acacia can assist you with sponsoring staff.

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