'Associated Entity' Requirement Traps for Unwary Players
January 31, 2015
Country / Territory
By: Kristina Petrovski
Most large Australian businesses and multinationals are readily able to meet the requirements for sponsoring foreign nationals on 457 visas.
However, one aspect of the 457 nomination process which can sometimes be more difficult to navigate through is that of meeting the ‘associated entities’ requirement, particularly where the business operates within a complex corporate structure.
What exactly is the ‘associated entity’ requirement?
A 457 nomination application is the first part of the visa application process for an approved business sponsor and addresses certain aspects of the nominated position to be filled by a foreign national. As part of this application, a business must also certify that the nominated position is within the business entity that holds the business sponsorship status or an ‘associated entity’ of that business.
Migration legislation refers to section 50AAA of the Corporations Act 2001 for the definition of an ‘associated entity’. Businesses generally meet this definition on the basis of:
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The entities being related bodies corporate; or
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The primary entity holding majority ownership of the secondary entity (or vice versa); or
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A third entity having majority ownership of both the primary and secondary entities.
In practice, this effectively allows a foreign national to be sponsored by the Australian entity, and remain or be employed by another associated entity which may either be local or offshore.
How could this be problematic?
Although the provisions of section 50AAA are broad enough to capture most corporate relationships sometimes whilst two entities may operate within the same overall business, they may not be associated according to the above definition.
This is a potential issue for a business seeking to sponsor a foreign national, particularly where the business cannot for operational or other reasons change the employing entity of the foreign national. The inability to resolve such an issue may require looking at other visa options, if available, or it may result in a foreign national being unable to take up the role in Australia.
How does this affect the visa holder?
For a 457 visa holder, working for an entity which is not the business sponsor or an associated entity is a breach of the 8107 visa condition and could potentially result in cancellation of the visa.
This may also cause issues should the foreign national wish to apply for employer sponsored permanent residence under the Temporary Residence Transition Scheme (TRTS). To be eligible for permanent residence under this pathway, the foreign national must have been working for the sponsoring entity, or an associated entity of the sponsor, for a minimum of 2 in the 3 years prior to their application being made. Further, if the foreign national has been working for an associated entity, that entity must have been considered as associated to the sponsor for the full 2 year period of claimed employment. This is relevant, for example, where a business has undergone a restructure.
What are the exemptions to this rule?
The ‘associated entity’ rule does not apply to a 457 nomination if the position has been nominated under an exempt occupation. Applicable mainly to senior management positions or those in the field of medicine, exempt occupations include:
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Chief Executive or Managing Director;
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Corporate General Manager; and
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General Medical Practitioner.
Are there any alternative options?
Where there is difficulty in meeting this requirement, businesses may need to look to an alternative visa which does not require the foreign national to be employed by the sponsor or an associated entity.
For example, if the foreign national is entering Australia to undertake highly specialized short term work, a Temporary Work (Short Stay Activity) 400 visa may be an option. Alternatively, if the foreign national is coming to undertaking occupational based training, the business may wish to consider a Training and Research 402 visa.
However, if the foreign national is to be working in Australia in a role which does otherwise fall within the guidelines of the 457 visa, then a business may need to explore the possibility of changing the legal employing entity of the foreign national to be the sponsoring business or an associated entity.
Above all, it is important to look at each case individually. The Fragomen team offers expert advice in all aspects of 457 visa applications and will work with you and your business to ensure the visa paths chosen for your employees are the right ones.
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