The Disallowance Motion discussed in our earlier post which seeks to strike out the retrospective changes to the Assurance of Support income requirement has been introduced to the Senate.

The Motion is scheduled to be discussed after 2pm today, Wednesday the 9th of May, as per Senate Business discussed here (see page 2; you will need a pdf viewer).

For those who want to follow proceedings live you can watch the Senate at this web link.

We will report the result of the Motion when we have it to hand.

Update: The changes to the AoS requirements are to be withdrawn, with the old rules to be reintroduced: see the blog post here.

The Australian Federal Budget has been handed down today.

Hidden away on page 14 of the revenue measures (pdf reader required) is the following narrative:

The Government will introduce a pathway to permanent residency for holders of Retirement (subclass 410) and Investor Retirement (subclass 405) visas.

As part of the establishment of the pathway, the Government will close the subclass 405 visa to new applicants. The subclass 410 visa is already closed to new applicants.

This measure continues Minister Dutton’s pattern of displacing visa applicants who are already awaiting the progression of an application: he has already undertaken a similar measure when introducing a skilled visa pathway for New Zealand citizens, displacing intending subclass 189 Skilled Independent visa applicants.

While this will be good news for the 405 and 410 visa holders in Australia who have been lobbying for permanent residency for many years the consequence for existing parent visa applicants is likely to be increased delays in the granting of their visas.

Indeed, we think it is surprising that parents of children in Australia – where the balance of family test is satisfied – will apparently be lower in the visa processing pecking order than those who will often have no other family in Australia.

In *** breaking news *** the Australian Greens have announced that they are introducing a Disallowance Motion in the Senate in respect of the Instrument that was introduced by the Government immediately after Easter, and which retrospectively affects parent visa applications lodged already.

See this SBS News web page for more details.

We will post more information here as soon as we know more.

Following the proverbial bolt from the blue a few days ago in which the income requirements for individuals acting as Assurers was increased significantly it is perhaps worth remembering that a limited company can also act as an Assurer.

Although a limited company acting as the Assurer has been encountered relatively rarely – at least until now – the regulations under which the Assurance of Support provisions are administered allow limited companies to act as Assurers, and to provide Assurances of Support.

Key points of note are:

• The limited company must be incorporated in Australia.   This will be confirmed by delivery of an Australian Securities and Investments Commission (ASIC) issued Certificate of Registration, confirming the Australian Business Number (ABN) of the company, and providing the bank account details of the company.
• Importantly, a company Assurer is not required to meet the income requirements that pertain to individuals.
• A limited company wanting to act as Assurer must have been operating for at least 2 years.   If the company is set up immediately prior to the AoS application and/or the company has not been operating or is not operating, the AoS will not usually be accepted.
• When assessing the AoS, Centrelink must be satisfied that the company has not been set up for the sole purpose of providing an AoS.  In this regard published guidance advises that: “… a body corporate should provide reliable and verifiable evidence (e.g. tax returns, correspondence from a registered accountant, statement from ASIC) of consistent trading activity for at least two financial or calendar years prior to the date of AoS application that can be used to verify that the body corporate has the capacity to support the assuree.”
• A joint AoS is not possible with a limited company.
• A company cannot give an AoS if it will result in more than 2 adults being assured.  There are no restrictions on the number of children for whom a company can give an AoS.
• The amounts of the AoS Bonds are higher for a company Assurer than for an individual.  Currently the sum to be deposited by a limited company is A$20k for each parent seeking the grant of a Contributory Parent visa; this increases to A$30k from the 1st of April 2019.

Comments on Strategy

For those adversely affected by the increase in the AoS income requirements the use of a limited company Assurer is likely to be worth exploring.

Limited companies are used commonly in Australia – by those who have personal service businesses as well as by those who employ staff and who pay wages.

It may therefore be that a family seeking to bring parents to Australia can enquire of friends and family already in Australia, with a view to utilising an already operating limited company to act as Assurer.

For those who are in a position to plan sufficiently in advance there may be merit in structuring affairs so that a limited company is incorporated and forms part of a holistic financial plan, being mindful that establishing a limited company for the sole purpose of delivering an AoS in due course risks the AoS being refused.

Remember that if the Assuree – ie the parent – is paid a Recoverable Social Security Payment during the AoS period, the resulting debt will be raised against the company.

This means that signing up to an AoS gives rise to a contingent liability on the part of the limited company.

This might be mitigated through the use of a personal guarantee by family and/or the parent/s, to be called upon in the event that a Recoverable Social Security Payment arises during the AoS period.

Recoverable Social Security Payments are discussed in more detail here.

In view of the need for a limited company to be operating for at least 2 years if it is to be accepted as an Assurer it is clear that planning is a key element of a successful visa outcome.

The author of this article is the Managing Director of Go Matilda Visas.  He is a Chartered Accountant as well as a Registered Migration Agent, and is therefore very well placed to explore alternative strategies for the delivery of an AoS through a limited company if an individual who was intending to be the Assurer is unable to meet the new income requirements.

As many will know, an Assurance of Support (“AoS”) is a requirement of all permanent parent visas:

• Subclass 143, Contributory Parent
• Subclass 864, Contributory Aged Parent
• Subclass 103, Parent
• Subclass 804, Aged Parent

An income test has to be satisfied by the person acting as Assurer – or persons, as up to 3 people can combine their income to provide a joint and several Assurance of Support.

A Legislative Instrument has been brought into force that significantly increases the income to be verified by the Assurer, with immediate effect.

In other words, the increase in the income requirements affects all who have not lodged the application for the AoS with Centrelink before the 1st of April, 2018.

This change will therefore affect many applicants for parent visas where the AoS is required at the final stages of the application process.

For subclass 143 Contributory Parent visa applicants the AoS process takes place typically some 2½+ years after the visa application was lodged with the Department of Home Affairs (formerly the Department of Immigration).

Furthermore, the person who gives the AoS is now required to demonstrate a minimum income for the current financial year and (now) the two previous financial years.

What Evidence is Needed?

For the current financial year, the person must provide evidence about his/her assessable income for the part of the financial year up to the date on which the assurance is given, which can include the following:

• A document showing the Assurer’s gross income and period of service or employment, such as a payslip, group certificate, letter from the person’s employer, or contract for service or employment, and/or
• A financial statement or other business record showing the person’s gross and net business income for a specified period.

For each of the two previous completed financial years the person must provide a Notice of Assessment issued by the Australian Taxation Office.

If the notice of assessment issued by the ATO does not disclose sufficient income to satisfy the minimum income requirement, then documents must be provided that show payments of the other income forming “assessable income” as noted below.

If the person acting as an Assurer has not lodged a tax return for the previous year, a letter from the employer is required that provides details of the person’s employment including the date of commencement of employment, the amount of taxable income, with a copy of the contract of employment.

A self-employed person is required to provide a letter from his/her accountant.

In such circumstances the person will have to provide the Notice of Assessment issued by the ATO for the previous financial year.

Assessable income of a person for a financial year includes any one or all of the following:

• Taxable income,
• Target foreign income,
• Tax free benefit or pension,
• Adjusted fringe benefits total,
• Tax-free salary received during overseas deployment as a member of the Australian Defence Force or Australian Federal Police

Where a person cannot provide evidence for either of the two previous financial years the income will be taken to be nil.

How Much Income?

The income requirement is equal to the Newstart Allowance (“NSA”) income cut-off amount – ie the NSA income cut-off amount for a single person with dependent children as at the 1st of July in each financial year – for each of the adults involved in the AoS, whether they are an assurer, assurer’s partner or assuree.

In other words the required income is the NSA income cut-off amount multiplied by:

• The number of assurers (up to a maximum of 3 assurers), plus
• The number of partners of the assurers, plus
• The number of adults who are being supported under the AoS (up to a maximum of 2 assurees).

If the assurer’s family or the assuree’s family includes children under 18 years of age, the assurer’s income threshold is increased by 10% of the NSA income cut-off amount for each child.

The income requirement will apply to each person giving an AoS, whether the assurance is given by one or more people.

The Managing Director of Go Matilda Visas is also a Chartered Accountant and a Registered Tax Agent in Australia, so is ideally placed to advise Assurers with more complex income circumstances who would like an opinion on whether they can satisfy the new AoS income requirement.

Examples

Here are some examples of the new income requirement, based on the current NSA income cut-off amount of $29,430.47.

1. One person (who has a partner) giving an AoS for two adults: the income requirement will be $117,721.88, being  the applicable NSA income cut-off amount multiplied by the total number of adult assurer, assurer’s partner and adult assurees – ie x 4
2. Two people (who each have a partner) give an AoS for 2 adults: the income requirement will be $176,582.82, being the applicable NSA income cut-off amount multiplied by the total number of adult assurers, assurers’ partners and adult assurees – ie x 6
3. One person gives an AoS jointly with his partner for 2 adults: the income requirement will be $117,721.88, being the applicable NSA income cut-off amount multiplied by the total number of adult assurers and adult assurees – ie x 4
4. One person with 2 children applies to give an AoS for a migrating family of 2 parents and 2 children, the minimum required income amount of the assurer is the total of:
   • $88,291.41, being the applicable NSA income cut-off amount multiplied by the total number of adult assurer and adult assurees – ie x 3, plus
   • $11,772.20, being 10% of the NSA income cut-off amount multiplied by the total number of the assurer’s children and the assurees’ children – ie x 4

An online income calculator is available at the Federal Government’s Centrelink web site.

Assurance of Support Bond

The amount of the AoS Bond remains unaltered at this time.

For subclass 143 and 864 Contributory Parent visa applicants these amounts are:

• Primary applicant – A$10,000
• Secondary applicant – A$4,000

However, from the 1st of April, 2019 the Bond amounts will increase to A$15,000 and A$6,000 respectively.

Commentary

With processing times for parent visas extending out well beyond 3 years for Contributory Parent visa applications these changes clearly have a retrospective effect on those who have parent visa applications in the system, awaiting allocation and assessment.

The Legislative Instrument has been issued under the Social Security portfolio, so it is not clear whether the Department of Home Affairs has been fully consulted – although we think it improbable the two Departments in question have not discussed this matter.

In the past Legislative Instruments have been disallowed – long time readers of this blog will recall the non Contributory Parent visas were initially disallowed by way of a similar process, but were reintroduced following a motion in the Upper House.

Those with families who are affected may therefore wish to make representations to their local Senator and Member in the House of Representatives.

We will keep you informed of any updates on this key issue.