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Migration Amendment (Skilling Australians Fund) Bill 2017 and Migration (Skilling Australians Fund) Charges Bill 2017



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ISSN 1328-8091

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BILLS DIGEST NO. 76, 2017-18 7 FEBRUARY 2018

Migration Amendment (Skilling Australians Fund) Bill 2017 and Migration (Skilling Australians Fund) Charges Bill 2017 Claire Petrie Law and Bills Digest Section

Hazel Ferguson and Henry Sherrell Social Policy Section

Contents

Purpose of the Bills .............................................................. 3

Commencement details .......................................................... 3

Background ......................................................................... 3

The impetus for the Bills—Commonwealth funding arrangements for skills training ............................................... 3

The status of skills reform ....................................................... 4

National skill shortages and the decline in apprenticeship numbers .......................................................... 5

Table 1: major national skill shortages, Australia, 2016- 17 ........................................................................................... 5

Figure 1: total apprenticeship commencements and completions 1963-2016 ........................................................ 5

Figure 2: trade (apprenticeships) and non-trade (traineeship) commencements 1995-2016 .......................... 6

National skill shortages and immigration policy ..................... 6

Training benchmarks ............................................................. 7

Table 2: national Partnership on the Skilling Australians Fund 2007-18 Budget State allocation estimates, including average yearly funding comparison with National Partnership Agreement on Skills Reform(a) ............. 9

Committee consideration .................................................. 10

Education and Employment Committee ............................... 10

Senate Standing Committee for the Scrutiny of Bills ............ 10

Policy position of non-government parties/independents ... 10

Date introduced: 18 October 2017

House: House of Representatives

Portfolio: Immigration and Border Protection

Commencement: At various dates, as set out in the digest.

Links: The links to the Bills, their Explanatory Memorandum and second reading speeches can be found on the home page for the Migration Amendment (Skilling Australians Fund) Bill 2017 and Migration (Skilling Australians Fund) Charges Bill 2017, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at

February 2018.

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Position of major interest groups ....................................... 11

Skilling Australians Fund ........................................................ 11

Skilling Australians Fund—Charges ....................................... 11

Financial implications ........................................................ 14

Statement of Compatibility with Human Rights .................. 15

Parliamentary Joint Committee on Human Rights ................ 15

Key issues and provisions................................................... 15

Note about contingent amendments .................................. 15

Nomination approvals ........................................................... 15

Nomination training contribution charge.............................. 16

Requirement to pay the NTC charge ................................... 16

Charges Bill ............................................................................ 17

Penalties and Commonwealth liability ................................ 18

Skilling Australians Fund Revenue and visa trends ............... 19

Permanent sponsored visas ................................................ 19

Temporary sponsored visas................................................. 19

Figure 3: Primary 457 visas granted each quarter 2005- 2017 ..................................................................................... 20

Labour Market Testing requirements.................................... 21

Background .......................................................................... 21

Existing provisions ............................................................... 21

Proposed amendments ....................................................... 21

Application provisions ........................................................... 22

Concluding comments ....................................................... 22

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Purpose of the Bills The purpose of the Migration Amendment (Skilling Australians Fund) Bill 2017 (SAF Bill) is to amend the Migration Act 1958 (the Act) to:

• require employers who nominate a worker for a temporary or permanent skilled visa to pay a ‘nomination training contribution charge’, which is to be imposed by the Migration (Skilling Australians Fund) Charges Bill 2017

• clarify that a person does not need to be approved as a sponsor at the time of lodging a nomination application and

• give the Minister the power to determine by way of legislative instrument, requirements for undertaking, and providing evidence of, Labour Market Testing.

The purpose of the Migration (Skilling Australians Fund) Charges Bill 2017 (Charges Bill) is to provide for the imposition of the nomination training contribution charge, enable the amount of the charge to be prescribed by the regulations, and specify a limit on the charge.

The Bills were introduced in the House by the Minister for Immigration and Border Protection. From 20 December 2017, this portfolio is part of the Home Affairs portfolio.

Commencement details Sections 1 to 3 of the SAF Bill commence on Royal Assent. Schedule 1 commences on Proclamation or six months after Royal Assent, whichever occurs first. Schedule 2 will commence at the same time as Schedule 1, but:

• Part 1 of Schedule 2 will not commence at all if the Migration Amendment (Family Violence and Other Measures) Bill 2016 (Family Violence Bill) has already been passed and commenced and

• Part 2 of Schedule 2 will not commence at all if the provisions of the Family Violence Bill have not yet commenced.1

Sections 1 and 2 of the Charges Bill commence on Royal Assent. Sections 3 to 10 commence at the same time as Schedule 1 of the SAF Bill—that is, on Proclamation or six months after Royal Assent, whichever occurs first.2

Combined, these two Bills will facilitate the introduction of the training levy which commences March 2018 and supports the new Temporary Skill Shortage (TSS) Visa.

Background The impetus for the Bills—Commonwealth funding arrangements for skills training The SAF Bill and Charges Bill respond to the Government’s 2017-18 Budget commitment to provide a new fund for skills training, following the expiry of the Council of Australian Governments (COAG) National Partnership Agreement on Skills Reform (NPASR) on 30 June 2017.3

Under the Intergovernmental Agreement on Federal Financial Relations (IGA-FFR), the Commonwealth supports states and territories to deliver skills training services through National Specific Purpose Payments (SPPs) under the National Agreement for Skills and Workforce Development (NASWD). From 2017-18 to 2020-21, approximately $1.5 billion in SPPs will go to the states and territories each year under the NASWD.4

The NASWD aims to:

• halve the proportion of Australians nationally aged 20-64 without qualifications at Certificate III level and above between 2009 and 2020

1. SAF Bill, clause 2. The effect of the Family Violence Bill on the provisions in the SAF Bill is discussed in more detail in the ‘Key Issues and Provisions’ section below. 2. Charges Bill, clause 2. 3. Australian Government, ‘Part 2: Payments for Specific Purposes’, Budget measures: budget paper no. 3: 2017-18, p. 35. A copy of the

National Partnership Agreement on Skills Reform (NPASR) and state and territory implementation plans are available from the Council of Australian Governments (COAG) Council on Federal Financial Relations (CFFR), ‘National partnerships - skills and workforce development’, CFFR. 4. Australian Government, ‘Part 2: Payments for Specific Purposes’, Budget measures: budget paper no. 3: 2017-18, p. 34.

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• double the number of higher level qualification completions (diploma and advanced diploma) nationally between 2009 and 2020

• improve the proportion of VET graduates with improved employment status after training.5

To support the aims of the NASWD, the Commonwealth committed $1.75 billion through National Partnership Payments (NPPs) under the NPASR from 2012-13 to 2016-17, to improve the accessibility, transparency, quality, efficiency and responsiveness of the vocational education and training (VET) sector.6 NPASR implementation plans varied according to jurisdictional needs, however the overall focus was on achieving structural change through improved quality assurance, data collection and management, and financing arrangements, including the extension of income contingent loans (then VET FEE-HELP) to government-subsidised Diploma and Advanced Diploma courses, and a limited number of Certificate IV courses (where this had not already been implemented at the time of NPASR commencement).7

The status of skills reform Although 2015 saw the Review of the National Partnership Agreement on Skills Reform (the NPASR Review) raise a number of concerns about the NPASR in relation to quality and transparency, especially in light of growing concerns about unscrupulous providers accessing VET FEE-HELP, states and territories met or exceeded all agreed outcomes.8 A number of key national reforms were implemented, including the introduction of the national My Skills website and Unique Student Identifier (USI).9

However, consistent with the broader concerns identified in the Review, progress against the higher level NASWD objectives is not on track, with growth in attainment slower than expected, and employment outcomes worsening over the term of the agreement.10 In particular:

• although the proportion of 20 to 64 year old persons without a non-school qualification at Certificate III or above has fallen substantially, from 47.1 per cent in 2009 (NASWD base year) to 38.4 per cent at May 2017, the trajectory has not been sufficient to put jurisdictions on track to achieve the objective of halving this figure by 202011

• although the number of higher level qualification completions (diploma and advanced diploma) has increased from 53,974 in 2009 to 62,100 in 2015 (latest year in COAG reporting), numbers have been declining in recent years from a peak of 88,783 in 201212

• labour market outcomes for VET graduates between 20 and 64 years worsened between 2008 and 2015, with improved graduate employment outcomes (being employed at a higher skill level after training or receiving a job-related benefit) declining 8.1 percentage points, from 67.6 per cent to 59.5 per cent of graduates.13

5. Department of the Prime Minister and Cabinet (PM&C), ‘Performance reporting dashboard: skills’, PM&C website. 6. CFFR, ‘Agreements’, CFFR website; COAG, National Partnership Agreement on skills reform, op. cit., p. 10. This is in addition to Commonwealth own purpose expenses, including VET programs and funding to students, employers and industry such as Australian Apprenticeships, VET Student Loans, and the Australian Apprenticeships Incentives Programme. More information on major funding flows

within the VET system is available from the Productivity Commission, ‘Vocational education and training’, Report on government services, 2017, pp. 5.4-5.6. 7. CFFR, ‘National partnerships - skills and workforce development’, op. cit. A large volume of research addresses the quality and financial sustainability concerns that accompanied the expansion of VET FEE-HELP, which was associated with the quality concerns raised in the ACIL

Allen Consulting Review of the National Partnership Agreement on skills reform, report to the Commonwealth and States and Territories, 21 December 2015. Although many of these issues were outside the scope of the NPASR, they had a significant impact on the higher-level objectives it was intended to contribute to. The details of the VET FEE-HELP controversy are discussed in more detail on pages 10-15 of J Griffiths, VET Student Loans Bill 2016 [and] VET Student Loans (Charges) Bill 2016 [and] VET Student Loans (Consequential Amendments and Transitional Provisions) Bill 2016, Bills digest, 41, 2016-17, Parliamentary Library, Canberra, 2016. 8. ACIL Allen Consulting, Review of the National Partnership Agreement on skills reform, report to the Commonwealth and States and Territories,

21 December 2015; PM&C, ‘Performance reporting dashboard: skills’, op. cit. 9. Ibid.

10. The latest performance reports are for 2016, available from PM&C, ‘Performance reporting dashboard: skills’, op. cit. 11. Australian Bureau of Statistics (ABS), Education and Work, Table 26, cat. No. 6227.0, ABS, Canberra. 2017. 12. Based on preliminary data for 2015, PM&C, ‘Performance reporting dashboard: skills’, op. cit.; Qualification levels under the Australian Qualifications Framework (AQF) are outlined on the ‘AQF qualifications’ webpage. 13. PM&C, ‘Performance reporting dashboard: skills’, op. cit.

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National skill shortages and the decline in apprenticeship numbers At a national level, the effect of the uneven progress on skills reform, along with the emphasis on expanding access to higher-level qualifications under the NPASR has partly been felt in skill shortages in trades. While there are few areas of major skill shortage in Australia, as can be seen in Table 1 below, ‘widespread shortages [are] apparent for just 5 assessed Professions (one of the lowest levels recorded over the past decade), but 22 Trades Worker occupations.’14

Table 1: major national skill shortages, Australia, 2016-17 Professions Technicians Trades Workers

Architect Construction

Estimator

Air Conditioning and refrigeration mechanic

Pastrycook Butcher or

smallgoods maker

Telecommunications trades worker

Audiologist Arborist Roof tiler Cabinetmaker Vehicle painter

Sonographer Automotive

electrician

Sheet Metal trades worker Fibrous plasterer Wall and floor tiler

Surveyor Baker Solid plasterer Glazier Motor mechanics

Veterinarian Bricklayer Stonemason Hairdresser Painting trades

worker

Locksmith Panel Beater

Source: Department of Employment, The Skilled Labour Market: A pictorial overview of trends and shortages, 4 September 2017, slide 38. This list has no status for immigration—see below for more information.

Recent years have seen a significant decline in the take up of apprenticeships to supply these trades, from a top of 376,800 in 2012, to 164,000 in 2017, with a corresponding decline in apprenticeship completion rates (see Figure 1 below).15

Figure 1: total apprenticeship commencements and completions 1963-2017

Source: Parliamentary Library based on National Centre for Vocational Education Research (NCVER), ‘Historical time series of apprenticeships and traineeships in Australia from 1963 to 2017’, NCVER website, 7 December 2017, Table 4; Table 6.

14. Department of Employment, The Skilled Labour Market: A pictorial overview of trends and shortages, 4 September 2017, slide 4. 15. Parliamentary Library based on National Centre for Vocational Education Research (NCVER), ‘Historical time series of apprenticeships and traineeships in Australia from 1963 to 2017’, NCVER website, 7 December 2017, Table 4; Table 6.

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However, as can be seen in Figure 2 below, decreases were most dramatic in non-trade (sometimes known as traineeship) commencements, where some policy analysts have argued that incentive payments may have been more of a factor in employer decision-making than workforce investment or need.16

Figure 2: trade (apprenticeships) and non-trade (traineeship) commencements 1995-2017

Source: Parliamentary Library based on National Centre for Vocational Education Research (NCVER), ‘Historical time series of apprenticeships and traineeships in Australia from 1963 to 2017’, NCVER website, 7 December 2017, Table 11.

In part, these decreases reflect judgments about employment prospects, with the worsening outcomes for VET graduates cited above reflecting stronger employment growth for professionals (35 per cent) than technicians and trade workers (9 per cent) over the decade between May 2007 and May 2017.17 However, as apprentices are engaged by employers with funding and other support from government, the number of apprentices and trainees is also influenced by Commonwealth and state and territory funding decisions.

National skill shortages and immigration policy In addition to qualification funding, immigration policy has been used by successive Australian governments in response to employer concerns about skill shortages.

Ruhs and Anderson find ‘employer demand for migrant workers has become a key feature of labour markets in high income countries.’18 However assessing the claims of employers in relation to the existing skills (and labour) available from the domestic labour force is ‘highly contested’.19

The 457 visa, a temporary, sponsored skilled visa category, was introduced in 1996 by the Howard Government following the Roach Review:

A country of Australia’s size cannot be expected to be completely self-sufficient at the leading edge of all skills in the area of key business personnel… Thus there will be a need for Australia to import certain skills, in much the same way as Australia is developing skills to export. 20

16. A full summary of changes is provided at Appendix 3 of the Australian National Audit Office (ANAO), Administration of the Australian Apprenticeships Incentives Program: Department of Education and Training, Audit report, 31, 2014-15, ANAO, Barton, ACT, 2015, p. 91; P Noonan and S Pilcher, Finding the truth in the apprenticeships debate, Mitchell Institute report, 03/2017, Mitchell Institute, Melbourne, August 2017.

17. Department of Employment, The Skilled Labour Market: A pictorial overview of trends and shortages, op. cit., slide 13. 18. M Ruhs and B Anderson, Migrant Workers: Who Needs Them? A framework for the analysis of staff shortages, immigration, and public policy, in M Ruhs and B Anderson, edn, Who Needs Migrant Workers? Labour shortages, immigration and public policy, Oxford University Press, Oxford, 2010, p. 15.

19. Ibid.

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According to the most recent review led by John Azarias, the introduction of the 457 visa program in 1996 was to better ‘facilitate the temporary entry of highly-skilled senior executives and specialists’. 21 However in response to ‘skill shortages experienced in the Australian labour market in the 2000s’ additional occupations were made eligible for employer sponsorship.22

While there are 28 occupations on the Department of Employment’s list of major skill shortages (Table 1 above), immigration policy has used more extensive lists of occupations for employers to hire temporary skilled migrants.23 The current occupation lists—the Medium and Long-term Strategic Skills List and the Short-term Skilled Occupation List—include 461 occupations.24 In April 2017, these occupation lists replaced the Consolidated Sponsored Occupation List which contained 651 occupations.25

This shows different approaches to skills policy across government portfolios. The 457 visa program (to be replaced by the Temporary Skills Shortage program from March 2018) allows an employer to sponsor a temporary migrant where no Australian resident is available for a nominated job. 26 An occupation must be nominated by the employer, which the migrant must be qualified to perform.

However while the occupational lists used for this visa program are much more extensive than those constructed by the Department of Employment, additional regulations within the 457 visa program are designed to ensure employers seek to hire for genuine skill shortages. These include the requirements for employers to pay temporary migrants the same salary and grant them the same conditions as existing Australian workers and for employees to be genuinely skilled applicants.27

Training benchmarks One program requirement for the current 457 visa program is to meet the training benchmarks. This eligibility criteria for employers has been in place since 2009 to promote training opportunities for existing Australian residents.28 The training benchmarks require employers who hire temporary skilled migrants to either pay two per cent of their payroll to a training fund or show one per cent of their payroll is spent on training activities.29 These are known as training benchmarks A and B respectively and designed as skills policy to ensure employers who use the 457 visa program also demonstrate a commitment to training local labour.30

From March 2018, the training benchmarks are being abolished and replaced by the levy proposed in these Bills. In his second reading speech for this Bill, Minister Dutton said ‘the Skilling Australians Fund levy will fully replace these training benchmark arrangements’.31 Successive reports have noted the inadequacy and difficulty of

20. N J Roach, Business temporary entry: future directions, Report by the Committee of Inquiry into the Temporary Entry of Business People and Highly Skilled Specialists, Canberra, 1995, p. 84. 21. J Azarias, J Lambert, P McDonald and K Malyon, Robust new foundations: a streamlined, transparent and responsive system for the 457 programme : an independent review into the integrity in the Subclass 457 programme, Department of Immigration and Border Protection

(DIBP), Canberra, September 2014, p. 20. 22. Ibid.

23. The 28 occupations listed by the Department of Employment as areas of major skill shortage are based on assessment of around 80 large skilled occupations defined in the Australian and New Zealand Standard Classification of Occupations (ANZSCO), and assessed occupations are subject to change annually. For more information see Department of Employment (Employment), ‘Skill shortage research methodology’, Employment website, last modified 31 August 2017. 24. P Dutton (Minister for Immigration and Border Protection), Migration (IMMI 18/004: Specification of Occupations—Subclass 457 Visa)

Instrument 2018. 25. DIBP, ‘Fact sheet one: reforms to Australia's temporary employer sponsored skilled migration programme - abolition and replacement of the 457 visa’, April 2017 (updated May 2017). The requirement that employers nominating a worker for a Temporary Skills Shortage visa pay a

contribution to the SAF was also included in the announced reforms. 26. M Turnbull (Prime Minister) and P Dutton (Minister for Immigration and Border Protection), Putting Australian workers first, media release, 18 April 2017. 27. Migration Regulations 1994, section 2.79. 28. C Evans (Minister for Immigration and Citizenship), Government announces changes to 457 visa program, media release, 1 April 2009. 29. P Dutton (Minister for Immigration and Border Protection), Migration (IMMI 17/045: Specification of Training Benchmarks and Training

Requirements) Instrument 2017. 30. J Philips and H Spinks, Skilled migration: temporary and permanent flows to Australia, Background note, Parliamentary Library, Canberra, 6 December 2012, p. 12. 31. P Dutton (Minister for Immigration and Border Protection), ‘Second reading speech: Migration Amendment (Skilling Australians Fund) Bill

2017’, House of Representatives, Debates, 18 October 2017, p. 11031.

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assessing the training benchmarks. The Azarias review in 2014 ‘found that there was little support by either sponsors or labour representatives for the current training benchmarks’.32 The review recommended the training benchmarks be abolished and replaced by an annual training contribution, with the latter being the purpose of these Bills. The proposed levy is discussed in detail under ‘Key Provisions’.

The Skilling Australians Fund According to Senator Simon Birmingham, Minister for Education and Training, the SAF will target declining apprenticeship numbers through industry funded support:

we’re funding this Skilling Australia Fund via a levy on any foreign workers that are brought in under certain visa categories, because that’s reinforcing to businesses that if you’re not going to play a role in helping support the training system in providing apprenticeship opportunities, well then, you’re going to be paying more for your labour because we will be taking the cash off you to help those who are going to help train our future apprentices.

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According to the Department of Education and Training, the SAF will support:

projects brought forward from states and territories which support apprenticeships, traineeships, and pre- and higher-level apprenticeships and traineeships with the following priorities: - occupations in demand - occupations with a reliance on skilled migration pathways - industries and sectors of future growth - trade apprenticeships - rural and regional areas - respect of people from targeted cohorts.

34

Priority industries ‘include but are not limited to key industries right across Australia, like tourism and hospitality, health and ageing, agriculture, engineering, manufacturing, building and construction, and the digital technologies.’35 Projects funded through the SAF would be in addition to existing Commonwealth, state and territory, and employer investment in Australian Apprenticeships.36

While the specifics of any new Partnership Agreement are subject to negotiation with the states and territories through the COAG Industry and Skills Council (CISC), according to the 2007-18 Budget papers the SAF, ‘when matched with funding from the States, will support up to 300,000 more apprentices, trainees and higher level skilled Australians over the next four years’.37 It is not clear if the 300,000 more apprentices will be in addition to

apprenticeship numbers according to current trends—75,000 apprenticeship commencements on average each year above trend would represent substantial growth from a base of 168,800 commencements in 2016.

Estimated state allocations from the SAF, subject to project approval, are provided in 2007-18 Budget paper 3, as summarised in Table 2 below.

32. J Azarias, J Lambert, P McDonald and K Malyon, Robust new foundations, op. cit., p. 12. 33. S Birmingham, ‘Interview with Simon Birmingham’, Breakfast with Aaron Stevens, 4RO, 31 October 2017. 34. Department of Education and Training (DET), ‘Skilling Australians Fund’, DET website, pp. 1-2. 35. S Birmingham, ‘Answer to Question without notice: Employment’, [Questioner: D Fawcett], Senate, Debates, 10 May 2017, p. 3273. 36. Commonwealth funding includes support through the Australian Apprenticeship Support Network, the Australian Apprenticeships Incentives

Program, and Trade Support Loans. The full range of support is outlined on the Department of Education and Training, Australian Apprenticeships website. See also: Australian Government, Portfolio budget statements 2017-18: budget related paper no. 1.5: Education and Training Portfolio, Program 2.8: Building Skills and Capability. 37. Australian Government, Budget measures: budget paper no. 2: 2017-18, p. 89.

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Table 2: national Partnership on the Skilling Australians Fund 2017-18 Budget State allocation estimates, including average yearly funding comparison with National Partnership Agreement on Skills Reform(a) $ million NSW VIC QLD WA SA TAS ACT NT Total

2017-18(b) 112.2 88.7 70.1 37.9 24.5 7.4 5.7 3.5 350.0

2018-19 115.4 91.6 72.0 38.9 25.1 7.5 5.9 3.6 360.0

2019-20 125.0 99.7 77.9 42.1 27.0 8.1 6.4 3.8 390.0

2020-21 118.7 95.1 73.8 39.9 25.4 7.6 6.0 3.6 370.0

Total 471.3 375.1 293.8 158.8 102.0 30.6 24.0 14.5 1470.0

Average total per year over four years (SAF)

117.8 93.8 73.5 39.7 25.5 7.7 6.0 3.6 367.5

Average total per year over five years (NPASR)(c)

112.3 87.0 71.4 36.5 25.4 7.8 5.6 3.6 349.6

Notes:

(a) In accordance with the IGA-FFR, allocations are based on the population share of each jurisdiction.

(b) $261.2 million of the 2017-18 total is budgeted to be made up from Commonwealth appropriations, in addition to projected Fund contribution revenues.

(c) 2012 dollars.

Source: Parliamentary Library based on Australian Government, ‘Part 2: Payments for Specific Purposes’, op. cit., p. 35; CFFR, ‘National partnerships - skills and workforce development’, op. cit., p. 27.

However, it is unclear if NPPs will match these estimates:

From 2018-19, amounts available to the States from the Skilling Australians Fund will be determined by the revenue paid into the Fund. States’ access to the Fund will be dependent on meeting eligibility criteria defined by the Commonwealth, including matching Commonwealth funding, achieving outcomes, and providing up to date data on performance and spending.

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Although National Partnerships by definition typically involve shorter-term funding to deliver a project or key reform, a lack of funding stability has played a role in the uneven progress on skills reform to this point. The NPASR Review identified funding stability to support VET reform as an issue to be addressed in future agreements:

Any future reform of the VET sector should be supported with public funding that is allocated across the system in a way that provides market stability, with reasonable long term certainty in the quantum of funding, and takes into account all related funding channels. 39

Thus, the potential of the SAF will be subject to implementation arrangements which are outside the Bills, and the stability of the industry funding source.

38. Australian Government, ‘Part 2: Payments for Specific Purposes’, op. cit., p. 5. While this wording appears to suggest Fund revenue may be managed through a Special Account, the Bills do not provide information on how the SAF will be created or administered. According to the Department of Finance (DoF), ‘Special appropriations: special accounts’, DoF website, ‘A special account is a limited special appropriation that notionally sets aside an amount that can be expended for listed purposes. The amount of appropriation that may be drawn from the CRF by means of a special account is limited to the balance of each special account at any given time.’ Under section 78 of the Public Governance, Performance and Accountability Act 2013, Special Accounts may be created by determination. 39. ACIL Allen Consulting, Review of the National Partnership Agreement on Skills Reform: final report, op. cit., p. xiii.

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Committee consideration Education and Employment Committee The Bills have been referred to the Senate Standing Committee on Education and Employment for inquiry and report by 9 February 2018. Details are available at the inquiry homepage.

Senate Standing Committee for the Scrutiny of Bills The Senate Standing Committee for the Scrutiny of Bills reported on the Bills on 15 November 2017. The Committee had no comment on the Charges Bill.40 In relation to the SAF Bill, the Committee raised concerns about the scope of proposed section 140ZN of the Act (at item 12 of Schedule 1), which enables the regulations to provide for the payment of a penalty in relation to an underpayment of the nomination training contribution charge. The Committee sought the Minister’s advice as to why the Bill delegates to regulations the power to impose a penalty, without setting any upper limit on the level of the penalty.41

The Minister responded to the Committee’s concerns on 4 December 2017, advising that he would consider moving an amendment to the Bill to set an upper limit on the level of the penalty that may be prescribed in the regulations.42

Policy position of non-government parties/independents Whilst substantive comment on the Skilling Australians Fund Bills has been limited, Senator Doug Cameron, Labor’s Shadow Minister for Skills, TAFE and Apprenticeships, has outlined a number of concerns about the proposed funding mechanism and likely outcomes of the SAF:

The proposed agreement and funding mechanism, the Skilling Australians Fund, has been widely derided as unworkable, inadequate and insecure.

The Skilling Australians Fund relies entirely on fees paid by skilled overseas workers. The contradiction of relying on fees paid by foreign workers filling skills gaps for Australia’s skills development seems lost on the Turnbull government.

The government’s claim that the Fund will create an additional 300,000 apprenticeships and traineeships is unrealistic. The rate of apprenticeships will have to rise from 2.2% of current jobs to 30% for all new jobs to meet this target. 43

Senator Cameron has further stated:

The Skilling Australians Fund will fail to fix the systemic problems that exist—instead it will exacerbate them.

Labor has no argument with charging employers for skilled worker visas - and ensuring that money goes to skill development.

However, the proposal that a skilled worker levy would be the sole source of Commonwealth revenue for skills development is astounding. 44

40. Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 13, 2017, The Senate, Canberra, 15 November 2017, p. 35. 41. Ibid., p. 34. 42. Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 15, 2017, The Senate, Canberra, 6 December 2017, p. 75. 43. D Cameron (Shadow Minister for Skills, TAFE and Apprenticeships), Turnbull Government all at sea on skills and apprentices as funding

remains in limbo, media release, 27 September 2017. 44. D Cameron (Shadow Minister for Skills, TAFE and Apprenticeships), National Apprentice Employment Conference: Group training: apprenticeships for prosperity Sydney, speech, 3 November 2017, p. 8.

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Position of major interest groups Skilling Australians Fund Many stakeholders from within the VET sector, including TAFE Directors Australia (TDA) and the Australian Council for Private Education and Training (ACPET), welcomed the initial announcement of the SAF.45 Executive Officer of the National Apprentice Employment Network (NAEN), Lauren Tiltman, stated ‘[t]his is a welcome focus on areas of genuine economic and social need with real potential to rebuild apprentice and trainee numbers which have been in decline.’46

However, following introduction of the Bills, VET stakeholders have raised concerns about the SAF in submissions to the Senate Standing Committee on Education and Employment inquiry into the Bills (the Inquiry). Although outside the scope of the Bills, these submissions raise concerns about the project-based approach to the SAF, with TDA observing:

While details of the proposed agreements are still being negotiated, TDA is concerned that the model may result in a piecemeal approach to reforms needed in the sector. The increased accountability and administrative work envisaged in such projects, while primarily between levels of government, will also flow through to TAFEs and other providers that will likely be the delivery arm for the initiatives… TDA sees national employers as playing a lead role in engaging apprentices and trainees, and supporting the integrity of a national training system. However, the project model through individual jurisdictions risks these employers needing to engage individually with each jurisdiction. This creates a clear disincentive plus a real cost premium, especially as each jurisdiction will pursue its priorities in different ways. TDA recommends that governments consider a pool of funds to support national employers.

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Similarly, NAEN proposes the SAF allow direct partnership agreements with national or state organisations to address this issue:

In principle we support targeted programs that allow for variations in regions and industries, however to limit this fund to small projects would create a significant administrative burden. Alternatively, to allow only larger project proposals due to administrative efficiencies, would disadvantage those in thin markets, regional and remote employers and potential apprentices, and small, emerging and innovative industries. NAEN calls for this fund to allow for direct partnership agreements with national or state organisations which have the capacity to deliver against the outcomes in the fund, at a reduced administrative cost, while still servicing thin markets.

48

Additionally, while stakeholders acknowledge the importance of addressing issues in the apprenticeship system, the TAFE submissions suggest a new Partnership Agreement should be wider in scope. TDA states that the SAF ‘risks focusing effort on apprenticeships and traineeships at the expense of responding to other important priorities facing the Australian economy.’49 The Victorian TAFE Association ‘is supportive of the idea that the Skilling Australians Fund help to underpin a new agreement, [but] it considers that this must form but one ‘plank’ within a National Partnership Agreement that is broader in scope and funding than the Skilling Australians Fund.’50

Skilling Australians Fund—Charges A number of industry stakeholders have commented on the new levy. Peter Mares, an author on contemporary temporary migration policy, noted in a pre-Budget article that a strengthened training obligation in the 457 visa

45. TAFE Directors Australia (TDA), ‘Federal budget unveils a new model of skills funding’, TDA Newsletter, 15 May 2017; Australian Council for Private Education and Training (ACPET), ACPET welcomes new and stronger $1.5 billion skills fund, media release, 10 May 2017. 46. National Apprentice Employment Network (NAEN), ‘Federal budget gives a much needed lift to apprentices and trainees’, media release, 10 May 2017. 47. TAFE Directors Australia (TDA), Submission to Senate Standing Committee on Education and Employment, Inquiry into the Migration

Amendment (Skilling Australians Fund) Bill 2017, and the Migration (Skilling Australians Fund) Charges Bill 2017 [provisions], 15 December 2017, pp. 1-2. 48. NEAN, Submission to Senate Standing Committee on Education and Employment, Inquiry into the Migration Amendment (Skilling Australians Fund) Bill 2017, and the Migration (Skilling Australians Fund) Charges Bill 2017 [provisions], 15 December 2017, p. 3. 49. TDA, Submission to Senate Standing Committee on Education and Employment, op. cit., pp. 2-3. 50. Victorian TAFE Association, Submission to Senate Standing Committee on Education and Employment, Inquiry into the Migration Amendment

(Skilling Australians Fund) Bill 2017, and the Migration (Skilling Australians Fund) Charges Bill 2017 [provisions], 15 December 2017, p. 5.

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program ‘is by far the most promising initiative to come out of the changes to temporary migration.’51 However, industry stakeholders have since raised concerns about the charges. Ai Group argued the levy is a ‘significant impost on businesses’ that will ‘add to costs, prices and will put pressure on business margins.’52 The Queensland Chamber of Commerce and Industry said ‘we don’t want to see small businesses burdened with upfront costs when there are continuing labour issues in sectors such as hospitality, tourism and agriculture.’53 John Hart, of the Australian Chamber National Tourism Council said ‘this will reduce local job numbers by limiting the ability of local businesses to grow.’54

The Migration Council Australia has suggested the fees levied on permanent visas may discourage employers from sponsoring migrants for permanent residency.55 In a submission to the Inquiry, the Federation of Ethnic Communities’ Councils of Australia (FECCA) recommended that an alternative funding source for the SAF be found, arguing:

The proposed levy presents further risks to migrant workers including the increased possibility of salary deductions (wage theft) and a rise in racism and discrimination. Migrant workers are already overwhelmingly the victims of widespread, systematic and long term wage theft. FECCA is particularly concerned that placing a levy on their employers will result in greater levels of wage theft and other forms of exploitation as the employers ‘pass on’ the associated cost of hiring migrant workers.’

56

In contrast to concerns about the cost of the levy, concerns have also emerged about a mismatch between the revenue it is likely to generate, and the level of funding required to adequately resource the SAF. The Australian Council of Trade Unions ‘fully supports the concept of an employer-paid levy for 457 visas’57 however voiced concern in the wake of the Budget that the levy may raise less revenue than previous skills funding mechanisms.58 In submissions to the Inquiry, VET stakeholders echo these concerns, suggesting SAF projects may be undermined by unstable funding. For example, the Victorian TAFE Association states:

[I]f this need for this policy initiative is established, then its future sustainability and funding should not hinge upon the ability to raise revenues through new migration charges… The Victorian TAFE Association considers that the levels of funding provided should first and foremost be driven not by the amount of money raised by migration charges but by the level required to train and educate Australians that maximises their contribution to Australia’s economic success, future productivity and growth.

59

To address this, NAEN suggests:

[T]he government should guarantee a minimum contribution to this fund in the absence of funding provided through these bills. The VET sector should never be in a position where the best it can do to ensure sustainable funding for apprentices, going forward is to encourage increased skilled migrant employment. That would counter the primary purpose of this fund.

60

Additionally, Peter Noonan, professorial fellow at the Mitchell Institute for Health and Education Policy, has argued that uncertainties about revenue for the SAF pose a challenge for the development of a partnership agreement with the states and territories to distribute the SAF:

51. P Mares, ‘The 457 visa is dead! Long live the TSS?’, Inside Story, 20 April 2017. 52. Ai Group, Budget 2017: Clearing the decks for new tilt at growth, media release, 9 May 2017. 53. K Whittle, in author unknown, ‘Foreign worker levy to hurt state, leaders say’, The Courier Mail, 11 May 2017, p. 6. 54. J Hart, in N Toscano, ‘Visa levies a “significant” new impost’, The Canberra Times, 11 May 2017, p. 26. 55. J Kelly, ‘Visa fee hike a slug on business’, The Australian, 11 May 2017, p. 6. 56. Federation of Ethnic Communities’ Councils of Australia (FECCA), Submission to Senate Standing Committee on Education and Employment,

Inquiry into the Migration Amendment (Skilling Australians Fund) Bill 2017, and the Migration (Skilling Australians Fund) Charges Bill 2017 [provisions], 15 December 2017, p. 3. 57. Australian Council of Trade Unions (ACTU), Submission to Senate Standing Committee on Education and Employment, Inquiry into the Migration Amendment (Skilling Australians Fund) Bill 2017, and the Migration (Skilling Australians Fund) Charges Bill 2017 [provisions],

15 December 2017, p. 1. 58. P Karp, ‘Budget skills scheme could lead to cut in funding, say unions’, The Guardian, 11 May 2017. 59. Victorian TAFE Association, Submission to Senate Standing Committee on Education and Employment, Inquiry into the Migration Amendment (Skilling Australians Fund) Bill 2017, and the Migration (Skilling Australians Fund) Charges Bill 2017 [provisions], 15 December 2017, p. 3. 60. NEAN, Submission to Senate Standing Committee on Education and Employment, Inquiry into the Migration Amendment (Skilling Australians

Fund) Bill 2017, and the Migration (Skilling Australians Fund) Charges Bill 2017 [provisions], 15 December 2017, p. 3.

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revenue for the fund will be highest when skilled migration is highest, and lowest when employment of locally skilled workers is highest. That means the revenue stream for the fund will be counter-cyclical to the purpose for which it was established: to increase the proportion of locally trained workers and to lessen reliance on temporary skilled migration visas. Unless the Commonwealth guarantees funding levels and continues to make up any shortfall in the revenue, it will be difficult, if not impossible, for the Commonwealth to enter meaningful, bilateral agreements with the states through the fund.

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In a joint post-budget press release in May, Victorian Skills and Training Minister Gayle Tierney, Queensland Minister for Training and Skills Yvette D’Ath, Western Australian Minister for Education and Training Sue Ellery and South Australian Minister for Higher Education and Skills Susan Close raised concerns about the timing of the SAF announcement, the funding mechanism, level of Commonwealth expenditure, and the narrower focus of the proposed agreement compared to the NPASR.62 However, the 2 June 2017 CISC Communiqué indicated that in principle agreement to progress arrangements for the SAF had been reached and ‘Ministers directed Skills Senior Officials to work on operational details and finalising the principles to refer to Council, in order to facilitate the drafting of an agreement as quickly as possible.’63

Yet, the Northern Territory Government, in a submission to the Inquiry, has raised concerns in relation to the charge and

a requirement to co-contribute 50 per cent of the funding to approved projects under the proposed national Partnership Agreement on the SAF currently being considered by First Ministers. Based on preliminary modeling this [along with the application of the levy to state governments] would effectively mean the Northern Territory Government would contribute 60 per cent to the total cost of approved projects.

64

The application of the levy to employers with substantial ongoing investments in employee training has also raised concerns among tertiary education stakeholders. As outlined above, under current arrangements employers are exempt from contributing to a training fund if they can show training expenditure equal to at least one per cent of their payroll (referred to as ‘training benchmark B’). A number of submissions contend that employers who meet this criterion may struggle to continue to invest in employee training in light of the cost of the new levy.65 Innovative Research Universities estimates cost increases totalling $1.7 million annually, from just under $1 million in 2017 to a projected $2.7 million in 2018 across member universities under the arrangements proposed in the Bill.66 Submissions to the Inquiry, including the Law Council of Australia’s, suggest retaining training benchmark B for employers in these circumstances.67

61. P Noonan, ‘The future of funding’, Campus Review, 1 May 2017, p. 2. 62. G Tierney (Victorian Skills and Training), Y D’Ath (Queensland Minister for Training and Skills), S Ellery (Western Australian Minister for Education and Training) and S Close (South Australian Minister for Higher Education and Skills), Turnbull’s Budget A Disappointment For Training And TAFE, media release, 11 May 2017.

63. COAG Industry and Skills Council (CISC), Communiqué for the COAG Industry and Skills Council Meeting Skills Ministers, 2 June 2017, p. 1. In response to a Senate Budget Estimates 2017-18 Question on Notice about the progress of this work, the Department of Education and Training indicated that senior officials have worked with state and territory counterparts on skills reform at eight meetings between April 2016 and April 2017. Senate Education and Employment Committee, Answers to Questions on Notice, Education and Training Portfolio, Budget Estimates 2017-18, Question SQ17-000600.

64. Northern Territory Government, Submission to Senate Standing Committee on Education and Employment, Inquiry into the Migration Amendment (Skilling Australians Fund) Bill 2017, and the Migration (Skilling Australians Fund) Charges Bill 2017 [provisions], 22 December 2017, p. 2. 65. Cross Cultural Communications Management, Submission to Senate Standing Committee on Education and Employment, Inquiry into the

Migration Amendment (Skilling Australians Fund) Bill 2017, and the Migration (Skilling Australians Fund) Charges Bill 2017 [provisions], 3 January 2018; Innovative Research Universities (IRU), Submission to Senate Standing Committee on Education and Employment, Inquiry into the Migration Amendment (Skilling Australians Fund) Bill 2017, and the Migration (Skilling Australians Fund) Charges Bill 2017 [provisions], 15 December 2017. 66. Innovative Research Universities (IRU), Submission to Senate Standing Committee on Education and Employment, Inquiry into the Migration

Amendment (Skilling Australians Fund) Bill 2017, and the Migration (Skilling Australians Fund) Charges Bill 2017 [provisions], 15 December 2017, p. 2. IRU member universities are Charles Darwin University, James Cook University, Griffith University, La Trobe University, Flinders University, Murdoch University and Western Sydney University. 67. Law Council of Australia, Submission to Senate Standing Committee on Education and Employment, Inquiry into the Migration Amendment

(Skilling Australians Fund) Bill 2017, and the Migration (Skilling Australians Fund) Charges Bill 2017 [provisions], 22 December 2017, p. 7; Cross Cultural Communications Management, Submission to Senate Standing Committee on Education and Employment, Inquiry into the Migration Amendment (Skilling Australians Fund) Bill 2017, and the Migration (Skilling Australians Fund) Charges Bill 2017 [provisions], 3 January 2018, p. 10.

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Universities Australia (UA) also suggests there is a ‘policy disconnect’ in sourcing SAF revenue from employers that rely on highly skilled migrants in professional occupations, as they are not able to draw from the SAF.68 UA makes the case that as universities already play a key role in skilling Australia’s workforce, consideration should be given to exempting them from the levy.69

A number of unions expressed support for the concept of a levy on employers who sponsor temporary migrant workers. The Electoral Trades Union (ETU) and Australian Manufacturing Workers Union (AMWU) both noted in-principle support for a ‘user pays’ system.70 However the ETU claimed the Bill creates a ‘perverse incentive’ for the Australian Government to increase the number of temporary migrant workers in Australia while the AMWU recommended additional requirements supporting the employment of apprentices and trainees directly by sponsors. 71

Financial implications The Explanatory Memorandum’s Financial Impact Statement says:

The training contribution charge is expected to generate revenue of $1.2b over the forward estimates. Expected expenditure from the Skilling Australian Fund over the forward estimates is $1.47b. 72

Modelling by John Ross, a higher education reporter at The Australian, suggests the new fees ‘will not raise enough money to finance the scheme’.73 In response to a Senate Estimates question, Minister Birmingham said the Australian Government is confident of the revenue projections, developed by:

Department of Immigration based on current immigration policy settings, reflective of recent changes to temporary worker visa arrangements and based on their expert understanding of historical visa flows and have all been independently verified by the Treasury through usual budget processes. 74

As the government has not released the underlying assumptions used for the $1.2b revenue figure raised from the levy charges, it is not possible to analyse the individual revenue contribution by visa category. Concern about whether the SAF will raise the revenue projected in the Budget was not addressed in any departmental submission to the Senate inquiry. However using a set of assumptions based on visa trends for 2015-16 and 2016-17, it is not clear if the Budget projections would be met in 2018-19 without a change in visa trends. This may occur via an increase in the number of visas granted and/or an extension in time spent on TSS visas in the future. This is discussed in more detail under Key Issues-Skilling Australians Fund revenue and visa trends.

68. While there are a range of education and training pathways into most skilled roles, in 2016-17, 56.4 per cent of primary temporary work (skilled) visas were granted for professional occupations, while the next largest occupation groups were technicians and trade workers at 22.3 per cent, and managers at 16.1 per cent. Department of Immigration and Border Protection, Subclass 457 Quarterly Report 30 June 2017, 2017, p. 10, DHA website. See Figure 3: Primary 457 visas granted each quarter 2005-2017 below for historical trends in this program.) The Australian Bureau of Statistics (ABS) Australian and New Zealand Standard Classification of Occupations (ANZCO) structure, which the DHA statistics conform to, measures skill level according to the amount of formal education and training, previous experience, and the level of on-the-job training required for an occupation. The ABS classifies professional occupations as normally at skill level 1, requiring a bachelor degree or higher qualification, while technicians and trade workers are normally at skill level 2, requiring an Associate Degree, Advanced Diploma or Diploma, or skill level 3, requiring a Certificate IV, or III. Managers are normally skill level 1 or 2. While equivalent work experience of five years for skill level 1 and three years for skill levels 2 and 3 can substitute for these qualifications, the relevant point is the dominance of higher education qualifications at skill level 1, which is the most prominent in these visa statistics. See ABS, Scope of the classification, ABS website, 2013, for more information. 69. Universities Australia, Submission to Senate Standing Committee on Education and Employment, Inquiry into the Migration Amendment

(Skilling Australians Fund) Bill 2017, and the Migration (Skilling Australians Fund) Charges Bill 2017 [provisions], 18 December 2017. 70. Electoral Trades Union, Submission to Senate Standing Committee on Education and Employment, Inquiry into the Migration Amendment (Skilling Australians Fund) Bill 2017, and the Migration (Skilling Australians Fund) Charges Bill 2017 [provisions], 22 December 2017, p. 3; Australian Manufacturing Workers Union, Submission to Senate Standing Committee on Education and Employment, Inquiry into the

Migration Amendment (Skilling Australians Fund) Bill 2017, and the Migration (Skilling Australians Fund) Charges Bill 2017 [provisions], 3 January 2018, p. 5. 71. Ibid.

72. Explanatory Memorandum, Migration Amendment (Skilling Australians Fund) Bill 2017, p. 2. 73. J Ross, ‘Levy “short-changes” skills fund’, The Australian, 17 May 2017. 74. Senator S Birmingham (Minister for Education), Senate Education and Employment Legislation Committee, Official committee Hansard, 31 May 2017, p. 104.

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Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bills’ compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that both Bills are compatible.75

Parliamentary Joint Committee on Human Rights The Parliamentary Joint Committee on Human Rights has stated that the two Bills do not raise human rights concerns.76

Key issues and provisions

Note about contingent amendments Schedule 2 of the SAF Bill contains two alternative sets of amendments, the commencement of which depends on the timing of the commencement of the Migration Amendment (Family Violence and Other Measures) Act 2017 (Family Violence Act), the Bill for which was before the Senate at the time of writing. 77 In summary:

• Part 1 of Schedule 2 contains amendments which will apply if the Family Violence Act commences after commencement of the provisions in the SAF Bill and

• Part 2 of Schedule 2 contains amendments which will apply if the Family Violence Act commences before commencement of the provisions in the SAF Bill.

The differences between the amendments in the two Parts are minor. The main distinction is that certain amendments in Part 2 use the term ‘approved work sponsor’ rather than ‘approved sponsor’.78 This reflects the changes proposed by the Migration Amendment (Family Violence and Other Measures) Bill 2016, which bring family sponsors within the sponsorship framework under Division 3A of Part 2 of the Migration Act.79 As it is not intended that family visa sponsors will be required to pay the nomination training contribution charge (NTC charge), certain provisions under Division 3A will need to clarify that they apply only to work sponsors.

The discussion below will state in the footnotes where two alternative items may apply, and any difference between them.

Nomination approvals Under the existing sponsorship framework in the Migration Act, a person must be approved as a sponsor before they can apply for approval of a nomination.80 Section 140GB provides that an approved sponsor may nominate either:

• an applicant (or proposed applicant) for a visa of a prescribed kind, in relation to either the applicant’s proposed occupation, the program to be undertaken or activity to be carried out by the applicant or

• a proposed occupation, program or activity.81

The SAF Bill proposes amending subsection 140GB(1) so that a nomination can be made by an approved sponsor, a person who has applied to be an approved sponsor, or a person who is a party to negotiations for a work agreement.82 As stated in the Explanatory Memorandum, the amendment clarifies that a person can lodge

75. The Statements of Compatibility with Human Rights can be found at pp. 19-23 of the Explanatory Memorandum to the SAF Bill and pp. 7-8 of the Explanatory Memorandum to the Charges Bill. 76. Parliamentary Joint Committee on Human Rights, Human rights scrutiny report, 12, 28 November 2017, p. 96. 77. Parliament of Australia, ‘Migration Amendment (Family Violence and Other Measures) Bill 2016 homepage’, Australian Parliament website. 78. SAF Bill, Schedule 2, items 19, 21 and 24. 79. E Karlsen and M Coombs, Migration Amendment (Family Violence and Other Measures) Bill 2016, Bills digest, 21, 2016-17, Parliamentary

Library, Canberra, 2016. 80. Sections 140E to 140GA of the Migration Act provide for the approval of sponsors. 81. Migration Act, subsection 140GB. 82. SAF Bill, Schedule 2, item 1 or item 19. Item 19 will commence if the Family Violence Act commences prior to the provisions in the present

Bill. Unlike item 1, it specifies that a person must be or have applied to be an approved work sponsor. A work agreement is an alternative form of sponsorship, established in the Migration Act at section 140GC, and with its requirements set out in Division 2.18 of Part 2A of the Migration Regulations.

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an application for a nomination at the same time as their application for approval as a sponsor.83 However, the person must be approved as a sponsor before the nomination can be approved.84

Reflecting this change, the majority of items in the SAF Bill make consequential amendments to other provisions in Division 3A to replace the term ‘sponsor’ with ‘person’.85

Nomination training contribution charge The SAF will be funded by a new levy—the Nomination Training Contribution (NTC) charge—paid by employers who sponsor temporary and permanent skilled migrants on the following visas:

• the Temporary Skill Shortage (TSS) visa

• the Employer Nomination Scheme (ENS) visa

• the Regional Sponsored Migration Scheme (RSMS) visa.

While the purpose and eligibility criteria of these three visa categories vary, each requires an employer to nominate a migrant for a visa. As part of the proposed changes, existing training requirements for employers sponsoring migrants will be abolished. In his second reading speech, Minister Dutton outlined the purpose of the levy as to ‘require employers seeking to access overseas skilled workers to contribute to the broader skills development of Australians.’86 He argued the existing system is ‘overly complex and lacks transparency’.87

Minister Dutton drew on the 2014 Azarias review of the 457 visa program as evidence for the levy. The Azarias review included a recommendation ‘that the current training benchmarks be replaced by an annual training fund contribution based on each 457 visa holder sponsored, with the contributions scaled according to size of business’.88

Others have proposed additional reasons for introducing a fee on employers sponsoring migrants. A previously-announced Labor policy also sought to introduce a fee, to ‘provide a genuine price signal to employers that they should look local first’.89 This is not a new policy suggestion, with a number of researchers recommending a higher fee charged to employers to better target the bipartisan goal of ensuring Australian citizens and permanent residents are employed as a priority over temporary migrants.90

Requirement to pay the NTC charge Item 12 of Schedule 1 of the SAF Bill inserts proposed Division 3B into Part 2 of the Migration Act. This deals with the payment of the NTC charge. Proposed section 140ZM provides that a person is liable to pay the NTC charge to the Commonwealth in relation to either:

• a nomination made under section 140GB, where the nomination is of a kind prescribed by the regulations91 or

• an application for approval of a nomination made under the regulations or in accordance with the terms of a work agreement, where the visa and nomination are of a kind prescribed by the regulations. 92

Payment of the NTC charge, where the person is liable to do so, is one of the criteria for approval of a nomination under section 140GB.93

83. Explanatory Memorandum, Migration Amendment (Skilling Australians Fund) Bill 2017, p. 12. 84. SAF Bill, proposed paragraph 140GB(2)(ab), inserted by item 3 OR item 21 of Schedule 2. Item 21 will commence if the Family Violence Act commences prior to the provisions in the present Bill. Unlike item 3, it specifies that a person must be approved as a work sponsor. 85. Ibid., Schedule 1, items 2, 4, 5 to 10; as well as Schedule 2, Part 1, items 2, 4, 5, 7-18 OR Part 2, items 20, 22, 23, 25-36. 86. P Dutton, ‘Second reading speech: Migration Amendment (Skilling Australians Fund) Bill 2017’, op. cit., p. 11031. 87. Ibid.

88. J Azarias, J Lambert, P McDonald and K Malyon, Robust new foundations, op. cit., p. 15. 89. B Shorten (Opposition Leader), B O’Connor (Shadow Employment Minister) and S Neumann (Shadow Immigration Minister), Labor’s plan to replace temporary workers with skilled Australians, Policy Factsheet, Australian Labor Party, 3 May 2017, p. 2. 90. See for example: I Campbell and J Tham, Labour market deregulation and temporary migrant labour schemes: An analysis of the 457 visa

program, Australian Journal of Labour Law, 26, 2013, p. 251; Migration Council Australia, More than temporary: Australia’s 457 visa program, Migration Council Australia, 2013, p. 6; P Mares, ‘Calling time on the 457 migration two-step’, the interpreter, Lowy Institute, 14 June 2017. 91. SAF Bill, proposed subsection 140ZM(1). 92. Ibid., proposed subsection 140ZM(2). 93. Ibid., proposed paragraph 140GB(2)(aa) inserted by item 3 OR item 21 of Schedule 2.

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Proposed section 140ZN states that the regulations may provide for a range of matters associated with the NTC charge, including when the charge is due and payable; the payment method; remission or refund; penalties for underpayment and the giving of information and keeping of records in relation to a person’s liability to pay the charge. The Explanatory Memorandum notes that this will allow the regulations to permit refunds (or partial refunds) of the charge where a nomination is refused, or where the actual period of stay of a nominated visa applicant is significantly less than anticipated.94

The Law Council raised concerns that the SAF Bill does not provide sufficient clarity about the circumstances in which a refund will be payable, particularly in cases where a nomination or sponsorship is refused, where a portion of the visa period granted is unused, or where a new sponsor takes over the sponsorship of a visa holder for part of the visa period.95 Additionally, it noted that the comparable Immigration Skill Charge in the United Kingdom permits refunds in circumstances including where the applicant:

• is successful, but does not come to work for the sponsor

• changes to another sponsor or

• leaves their job before the end date on their certificate of sponsorship.

The Law Council recommended that consideration be given to whether these additional reasons for refunding the NTC charge should be incorporated into the SAF scheme.96 It also suggested that the Explanatory Memorandum to the SAF Bill clarify whether business sponsors will need to pay the charge for any of the worker’s dependents, and whether there is anything to prevent sponsors from ‘passing on’ the charge to applicants.97

Charges Bill The Charges Bill provides for the imposition of the NTC charge. Clause 7 imposes the charge, payable under section 140ZM of the Migration Act. The Charges Bill has extra-territorial effect, which means the charge is payable in relation to a nomination,98 whether it is made in or outside Australia and whether the person who is liable to pay the charge is in or outside Australia.99

Clause 8 provides that the amount payable by a person in relation to the nomination is the amount:

• prescribed in the regulations or

• worked out in accordance with a method prescribed by the regulations.

Subclause 8(2) states that the regulations may prescribe different charges or methods for different kinds of visas, or different kinds of persons. The Explanatory Memorandum notes that the regulations may, for example, prescribe different charges in relation to temporary and permanent visas, or different charges depending on the annual turnover of the employer to which the nomination relates.100

In his second reading speech, Minister Dutton stated that it is intended that the charge will vary depending on whether a business has an annual turnover of more or less than $10 million.101 Small businesses—those with a turnover of under $10 million—will be required to pay $1,200 per year for each temporary overseas worker, and a one-off levy of $3,000 for each permanent overseas worker. Businesses with an annual turnover of $10 million or more will be required to pay $1,800 per year for each temporary worker and a one-off payment of $5,000 for each permanent worker.102

94. Explanatory Memorandum, Migration Amendment (Skilling Australians Fund) Bill 2017, op. cit., p. 7. 95. Law Council of Australia, Submission to Senate Standing Committee on Education and Employment, op. cit., p. 6. 96. Ibid.

97. Ibid., p. 7. 98. Clause 6 of the Charges Bill defines nomination to mean a nomination of a kind mentioned in proposed subsection 140ZM(1) or (2) of the Migration Act. 99. Charges Bill, clause 5. 100. Explanatory Memorandum, Migration (Skilling Australians Fund) Charges Bill 2017, pp. 4-5. 101. P Dutton, ‘Second reading speech: Migration Amendment (Skilling Australians Fund) Bill 2017’, op. cit., p. 11032. 102. Ibid.

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The amount prescribed in the regulations cannot exceed the NTC charge limit for the relevant financial year.103 This limit is set out in clause 9. For the financial year beginning 1 July 2017, the limit is:

• for a nomination relating to a temporary visa—$8,000

• for a nomination relating to a permanent visa—$5,500.104

For later financial years, the NTC charge limit is to be calculated in accordance with subclauses 9(2) to (5). The limit is determined by multiplying the limit for the previous financial year by the greater of 1 or the indexation factor. The indexation factor is worked out by dividing the sum of the index numbers105 for the CPI quarters of the 12 month period ending 31 December before the later financial year, by the sum of the index numbers for the CPI quarters in the 12 months ending on the previous 31 December.106

The Explanatory Memorandum to the Charges Bill notes that the NTC charge limits in subclause 9(1) are approximately ten per cent above the highest NTC charge proposed to be prescribed in the Migration Regulations, being $7,200 for temporary visas (that is, $1,800 for a large business for the maximum visa duration of four years) and $5,000 for permanent visas. It states that the charge limits:

…provide flexibility for the Australian Government to make increases to the nomination training contribution charge in the future while providing certainty for business as to the limited scope of a potential increase. 107

Clause 10 of the Charges Bill enables the Governor-General to make regulations prescribing matters as required or permitted by the Migration (Skilling Australians Fund) Charges Act 2017, or which are necessary or convenient for carrying out or giving effect to that Act.

Penalties and Commonwealth liability As noted above, proposed paragraph 140ZN(e) of the Migration Act (inserted by item 12 of Schedule 1 of the SAF Bill) enables regulations to prescribe the payment of a penalty in relation to underpayment of the NTC charge. Proposed section 140ZO further specifies that where the NTC charge or an underpayment penalty is due and payable to the Commonwealth, the amount is a debt due to the Commonwealth and may be recovered by action in a court of competent jurisdiction.

Proposed section 140ZP relates to the liability of the Commonwealth to pay the NTC charge in relation to its own nominations under section 140ZM. The Explanatory Memorandum notes that the Commonwealth cannot make itself liable to pay Commonwealth taxes or fees.108 However, proposed subsection 140ZP(1) states that it is Parliament’s intention that the Commonwealth should be notionally liable to pay the NTC charge. The Finance Minister may make such written directions ‘as are necessary or convenient’ for carrying out or giving effect to this intention. 109 Such directions are not a legislative instrument, but are expressed to have effect, and must be complied with, despite any other Commonwealth law.110

Proposed section 140ZQ provides that proposed Division 3B of Part 2 of the Migration Act binds the Crown in right of the Commonwealth and each of the states and territories. The provision expressly states that this does not make the Crown liable to be prosecuted for an offence; however, this does not prevent it from being liable to pay a pecuniary penalty.111

103. Charges Bill, subclause 8(3). 104. Ibid., subclause 9(1). 105. Subclause 9(2) of the Charges Bill specifies that the index number for a CPI quarter means the All Groups Consumer Price Index number that is the weighted average of the 8 capital cities and published by the Australian Statistician in relation to the CPI quarter. Subclause 9(4) states

that in working out the indexation factor, only the index numbers published in terms of the most recently published index reference period for the CPI should be used. 106. Charges Bill, subclause 9(2). 107. Explanatory Memorandum, Migration (Skilling Australians Fund) Charges Bill 2017, p. 5. 108. Ibid., p. 8. This principle was recognised by the High Court in Queanbeyan City Council v ACTEW Corporation Ltd [2011] HCA 40; also see Australian Tax Office (ATO), ‘Miscellaneous taxation ruling: MT 2011/1’, ATO Legal Database. 109. SAF Bill, proposed subsection 140ZP(2). 110. Ibid., proposed subsections 140ZP(3) and (4). Proposed subsection 140ZP(5) defines Commonwealth as including a ‘Commonwealth entity’ within the meaning of the Public Governance, Performance and Accountability Act 2013 (PGPA Act) that cannot be made liable to taxation by a Commonwealth law. Section 10 of the PGPA Act defines ‘Commonwealth entity’ to include a body corporate established by a law of the Commonwealth, or prescribed by an Act or the rules to be a Commonwealth entity. 111. Ibid., proposed subsections 140ZQ(2) and (3).

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Skilling Australians Fund Revenue and visa trends A number of immigration factors will determine future revenue for the SAF, as revenue will be dependent on the number of visas granted, and for Temporary Skills Shortage (TSS) visas, how long each visa is valid.

Permanent sponsored visas Government policy has traditionally been the primary factor determining the number of permanent visas granted each year. According to the Department of Immigration and Border Protection, the number and allocation of permanent visas is set by the Australian Government following:

… broad public consultations with stakeholders, including business and community groups from all states and territories. Community views, economic and labour force forecasts, international research, net overseas migration and economic and fiscal modelling are all taken into account when planning the programme. 112

SAF revenue raised by visa grants for both permanent employer sponsored visa categories-the Employer Nomination Scheme (ENS) and the Regional Sponsored Migration Scheme (RSMS)-will therefore depend on how many visas are allocated by future governments.

Since 2014-15, there have been 48,250 visas available each year in these visa categories.113 However this figure includes the sponsored employee and their spouse and/or children. Using figures provided by the Department of Immigration and Border Protection, approximately 45.8 per cent of permanent employer sponsored visas were granted to the primary visa holder, the employee, in 2015-16, equal to 22,110.114 This is the relevant figure for revenue projections as only the employee is subject to the proposed levy. The government does not control how many primary visa holders will bring spouses and dependent children however it is likely variations in the number of spouses and children will only marginally affect the revenue raised.

While the allocation of ENS and RSMS visas has remained constant for the past three financial years, the government may choose to increase or decrease this figure in the future. In the past, demand for these visas from employers and immigrants has outstripped the supply of places allocated by the government, meaning the government allocation is the number of visas granted.115 For example, as at 30 June 2017 there were 52,082 applications waiting to be processed by the Department of Immigration and Border Protection, more than the allocation for 2017-18.116

However there is a possibility recent policy change may see the supply of available places outstrip demand from immigrants, as fewer migrants and employers are able to meet the eligibility criteria. In an August 2017 report discussing recent policy change, Dr Bob Birrell concluded:

It seems very likely that when the reset is in full operation from March 2018, the number of permanent entry employer sponsorship visas will drop to a third or less of the current annual number of around 48,000 (principal applicants and dependents). 117

Birrell nominates the reduction in eligible occupations for the ENS and RSMS visa, as well as the proposed work experience requirement. A two-thirds reduction in the number of permanent employer sponsored visas would substantially reduce incoming revenue for the SAF over the forward estimates.

Temporary sponsored visas Compared to permanent sponsored visas, there are a larger number of factors determining revenue for temporary sponsored visas. Government policy can play a role, such as by limiting or expanding the number of eligible occupations and the level of the salary threshold used. However in addition to policy decisions, economic

112. DIBP, ‘Fact Sheet: 2017-18 Migration Programme planning levels’, DIBP website. 113. See DIBP, ‘Fact Sheet: 2017-18 Migration Programme planning levels’, op. cit; DIBP, Report on Migration Programme 2014-15, p. 12; 2015-16 Report on Migration Programme, p. 12. 114. DIBP, 2015-16 Migration Programme visa information, data request provided to the Parliamentary Library by the Department of Immigration

and Border Protection, 30 October 2017. 115. See DIBP, Report on Migration Programme 2014-15; 2015-16; 2016-17, Australian Government, Canberra. 116. DIBP, Report on Migration Programme 2016-17, Australian Government, Canberra, p. 7. 117. B Birrell, The Coalition's 457 visa reset : tougher than you think, Research report, The Australian Population Research Institute, August 2017,

p. 13.

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factors are important, such as the demand for labour from employers. This can produce substantial variation in the number of visas granted over time as demonstrated in Figure 3 below.

Figure 3: primary 457 visas granted each quarter 2005-2017

Source: Parliamentary Library based on Australian Government, Temporary Work (Skilled) visa (subclass 457) Programme, data.gov.au, BP0014 Temporary Work (skilled) visas granted 30 September 2017.

Demand for temporary migrant workers slowed in the aftermath of the Global Financial Crisis, before rising with the post-GFC mining boom. More recently, tighter policy settings and labour market slack have reduced the number of visa grants. For example, the July-September 2017 quarter is down 37 per cent compared to the same quarter in 2016.

Unlike permanent sponsored visas, the price of the levy for temporary sponsored visas will depend on the length of time the visa is valid. Currently, 457 visas are valid for either up to two years or up to four years, depending on what occupation is nominated. The Department of Immigration and Border Protection does not provide information on how long visas are granted for, noting four years is the maximum time period for one visa grant.

The Azarias review documented the length of time for 457 visas granted between August 1996 and May 2010: • 6 months or less: 15 per cent

• 6-12 months: 16 per cent

• 1-2 years: 27 per cent

• 2-3 years: 21 per cent

• 3-4 years: 16 per cent

• 4 years and longer: 5 per cent. 118

Both the number of temporary sponsored skilled visas and their validity length may change in response to both government policy and economic conditions. Forecasting this change is difficult, as future demand from employers and immigrants may not be reflected in historical trends.

118. J Azarias, J Lambert, P McDonald and K Malyon, Robust new foundations, op. cit., p. 23.

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Taken together, SAF revenue will shift over time in response to both changes in permanent and temporary skilled sponsored visa grants. These shifts will be difficult to forecast, particularly if the demand for permanent sponsored visas fails to meet the allocated supply.

Labour Market Testing requirements

Background Labour Market Testing (LMT) is the process of advertising a job to recruit Australian citizens and permanent residents. Since the introduction of the 457 visa program in 1996, LMT has been a prominent point of contention. However, recent changes announced in April 2017 signal bipartisan support for LMT as a precondition for any temporary sponsored visa, noting there are a series of international treaties that give effect to exemptions.

LMT was required on the introduction of the 457 visa in 1996, with a waiver applying if sponsored migrants undertook ‘key activities’.119 In July 2001, LMT was abolished and replaced by a minimum skill threshold.120 In July 2013, LMT was re-introduced by the Migration Amendment (Temporary Sponsored Visas) Act 2013.121 However in practice, a majority of occupations were exempted from LMT by the skill level exemption legislative instrument.122 Minister Dutton has signalled these skill-based exemptions will be removed from March 2018, leaving only international treaty obligation exemptions in place.123

Existing provisions The SAF Bill gives the Minister the power to determine certain requirements for LMT. Currently, section 140GBA of the Migration Act provides that certain nominations are subject to a requirement to provide evidence of LMT unless international trade obligations apply. Where section 140GBA applies to a sponsor (and there is no applicable exemption), LMT must be undertaken as a condition for approval of a nomination.124

Existing subsection 140GBA(5) sets out certain evidence of LMT which ‘must’, and evidence which ‘may’ be provided in support of a nomination under section 140GB. It provides that the nomination must be accompanied by information about the approved sponsor’s attempts to recruit suitably qualified and experienced Australian citizens or permanent residents to the position. 125 Further details of what should be included in this are set out in existing subsection 140GBA(6).

Additional evidence may also be provided, including recent research relating to labour market trends (generally and in relation to the nominated occupation), expressions of support from Commonwealth, state and territory government authorities with responsibility for employment matters, and any other type of evidence determined by the Minister by legislative instrument.126

Proposed amendments The SAF Bill repeals subsections 140GBA(5),(6) and (6A), and substitutes them with proposed subsections 140GBA(5) to (6C).127 The main effect of the amendments is to:

• remove from the Migration Act all particulars of the evidence that must (and may) be provided in relation to LMT and

• give the Minister the power to determine both the manner in which LMT must be undertaken and the kinds of evidence of LMT which should accompany a nomination.

119. P Ruddock (Minister for Immigration and Multicultural Affairs), Streamlined temporary business entry approved, media release, Canberra, 5 June 1996. 120. P Ruddock, (Minister for Immigration and Multicultural Affairs), New visa processes to help business, overseas students and skilled migration from 1 July 2001, media release, Canberra, 1 July 2001. 121. Migration Amendment (Temporary Sponsored Visas) Act 2013, Schedule 2. 122. M Cash (Assistant Minister for Immigration and Border Protection), Migration Act 1958 - Specification of Occupations Exempt from Labour

Market Testing - IMMI 13/137. 123. DIBP, Fact sheet one: reforms to Australia’s temporary employer sponsored skilled visa program - abolition and replacement of the subclass 457 visa, DIBP, 19 April 2017, p. 3. 124. Migration Act, paragraph 140GB(2)(a). 125. Ibid., paragraph 140GBA(5)(a). 126. Ibid., paragraph 140GBA(5)(b). 127. SAF Bill, Schedule 1, item 15.

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Proposed subsection 140GBA(5) states that the Minister may, by legislative instrument, determine the manner in which LMT in relation to a nominated position must be undertaken.128 Proposed subsection 140GBA(6) provides a non-exhaustive list of matters which the Minister may determine as part of this, including the language, method and duration of advertising of the position.

Under proposed subsection 140GBA(6A), the Minister has the power to make a legislative instrument determining the kinds of evidence which must accompany a nomination. This may include a copy of any advertising which has been required in relation to the position. 129

Proposed subsection 140GBA(6C) states that in either of these legislative instruments, the Minister may prescribe different manners of undertaking LMT, or different evidence to be provided, for different nominated positions or classes of nominated positions. A legislative instrument made under either proposed subsection 140GBA(5) or (6A) will not be disallowable.130

In his second reading speech for the Bills, Minister Dutton stated that the amendments will ensure a uniform approach to LMT from employers, and that the quality of the LMT being conducted is properly assessed.131

The Law Council expressed support for the proposed amendments to the LMT requirements, noting that the types of evidence of LMT which will be required to accompany the nomination are similar to those required by other jurisdictions, including New Zealand, the UK and Canada.132 The Australian Council of Trade Unions (ACTU) raised concerns that the proposed provisions give the Minister significant discretion to determine LMT requirements, arguing:

the extent to which, if at all, such a system will establish a rigorous LMT process will of course depend on the content of any legislative instrument/s that the Minister chooses to issue or indeed whether the Minister elects to issue such instruments at all. 133

The ACTU suggested that the text of the SAF Bill be amended to specify that the evidence of LMT required include the number of Australian citizens and permanent residents who applied for the nominated position and the reasons why they were considered not suitably qualified or experienced.134

Application provisions The amendments in the SAF Bill which relate to the NTC charge and to the changed LMT requirements will apply in relation to nominations made on or after the commencement.135 The Explanatory Memorandum notes that this will prevent businesses from being simultaneously required to comply with the existing training benchmarks and pay the NTC charge. Sponsors will not be required to continue to meet the training benchmark requirements after commencement.136

Amendments relating to who can lodge a nomination application will apply to all nominations made on or after commencement, as well as nominations made before commencement but not yet decided.137

Concluding comments The SAF Bill and Charges Bill respond to both skills and immigration policy trajectories to provide more sustainable and accountable funding to address skill shortages, particularly those currently served by Australian Apprenticeships. As Dr Craig Fowler and Dr John Stanwick of the National Centre for Vocational Education

128. Additionally, item 13 of Schedule 1 inserts proposed paragraph 140GBA(3)(aa) which provides that in order to satisfy the LMT condition, the testing must be undertaken in the manner determined under proposed subsection 140GBA(5). 129. SAF Bill, Schedule 1, item 15, proposed subsection 140GBA(6B). 130. Section 10 of the Legislation (Exemptions and Other Matters) Regulation 2015 (Cth) provides, relevantly, that an instrument (other than a

regulation) made under Part 2 of the Migration Act is not disallowable (see item 20 in table). 131. P Dutton, ‘Second reading speech: Migration Amendment (Skilling Australians Fund) Bill 2017’, op. cit., p. 11033. 132. Law Council of Australia, Submission to Senate Standing Committee on Education and Employment, op. cit., p. 8. 133. ACTU, Submission to Senate Standing Committee on Education and Employment, op. cit., pp. 9-10. 134. Ibid., p. 10. 135. SAF Bill, Schedule 1, item 16(2) and (3). 136. Explanatory Memorandum, Migration Amendment (Skilling Australians Fund) Bill 2017, op. cit., pp. 10-11. 137. SAF Bill, Schedule 1, item 16(1) and Schedule 2, item 37.

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Research have observed ‘[t]he apprenticeship model is valuable and enduring—and it can be made much more bold and ambitious.’138

However, while the Bills set the specifications for charges to fund the SAF, outcomes will ultimately rely on implementation arrangements well outside the scope of these Bills. The value of this more focused investment in apprenticeships (compared with the former NPASR, which funded structural change in the VET system overall) depends on a new Partnership Agreement with state and territory governments, their matched funding and project specifications, and the revenue from the levy, if projects are to genuinely add value to existing apprenticeship investment.

As with any forecast, there is an inherent degree of uncertainty in future immigration trends. This is particularly pertinent in periods following substantive policy change, including the Turnbull Government’s April 2017 announced replacement of the 457 visa program, and changes to associated permanent sponsored visa categories. Revenue collection for the Skilling Australians Fund generated from the proposed levy will need to be followed closely over time if cross-jurisdictional agreements between the Federal Government and the state and territory governments on skills policy come to wholly rely on this funding source.

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138. C Fowler and J Stanwick, A Chance to be bold and ambitious: make apprenticeships the lynchpin to a better integrated tertiary education sector, National Centre for Vocational Education Research, 8 June 2017, p. 9.