Start-up Companies and Overseas Businesses: Applying for Standard Business Sponsorship
Written By Shannon Dutt
Mon, Nov 14, 2016
As part of our series in looking at issues affecting businesses seeking to use 457 visas to recruit skilled workers, a number of situations commonly arise for start-up companies:
• There may be a need for a new company to quickly recruit skilled staff from overseas. This could include the role of Managing Director/CEO particularly if the new company is a newly established subsidiary of an overseas business.
• There are situations in which a new company needs to take on the sponsorship of existing 457 visa holders. This can occur, for example, when one company is bought out and a new business is created to take over operations.
If a business is a start-up or has been trading in Australia for less than 12 months, there are aspects to keep in mind when applying for Standard Business Sponsorship (SBS), which differ to applications for established businesses. Three principal issues tend to arise:
• Evidence of operations – One requirement to become a 457 visa sponsor is providing evidence that a business is operating. Difficulties arise when the need for the 457 worker is urgent in order for the business to function. There can be a dramatic mismatch in the timelines between the milestones the business must pass in becoming operational and the ability to secure sponsor status or have visa granted.
• Staff training – Becoming a 457 visa sponsor requires companies to meet certain benchmarks in relation to their expenditure on the training of their Australian staff. In a start-up scenario, companies are able to provide plans of the training they intend to provide during their first twelve months of operations. Developing plans of sufficient detail can be difficult where the growth a business’ staffing structure and numbers is uncertain.
• Shorter validity periods for the sponsorship and visas – Standard business sponsorships are usually valid for 5 years (or 6 years for Accredited Sponsors), and 457 visas are typically granted with 4 year validity. For start-up scenarios, however, both of these are reduced to 18 months. This means the entire application process must be repeated within 18 months after the grant of the SBS and any visas.
Demonstrating operation in Australia
The business will need to demonstrate lawful operation in Australia. As the business may be newly established, it may be difficult to show that the business is active. Supporting information that can demonstrate operation in Australia can include:
• Advertising for the business
• Sale of goods or provision of services contracts
• Evidence to show lease of premises
• Offer letters for employees
• Evidence of opening bank account in Australia
• ABN registration
• Evidence of business name registration
It is good practice for the company to provide a business plan covering at least its first twelve months of operation. Apart from showing planned income/revenue and planned out-goings, the plan might also include a timeline showing anticipated dates for the milestones reflected by the listed documents – e.g. date of company business name registration, date ABN acquired, date premises leased, etc – as well as information such as the location where operations will be based, the forecast business revenue, the capital funding available, etc.
Tip - Ideally the plan should include an organisation chart showing the positions that are anticipated at the end of the first twelve months, and an indication of when it is expected the various positions will be recruited.
Tip – The requirement to demonstrate company operations can create a chicken-and-egg situation, as in some cases it can be difficult for a company to successfully establish operations without the assistance of the 457 visa holders it wants to sponsor.
• For a new start up, it may be necessary plan around an 8-12 week immigration department processing time
• For a new subsidiary of an overseas company, you may want to consider initial visa sponsorship by the parent company (see below).
• In buy-out or restructuring scenarios – where the operations of an existing company will be taken over – the issue is likely to become more about the early preparation so that the paperwork can be lodged as quickly as possible after the buy-out/restructure has occurred.
Training requirements: Auditable Training Plan
As a business operating for less than 12 months, a plan showing how the company expects to meet the Training Benchmark during its first year of operation is required. The immigration department refers to this as an Auditable Training Plan. The title refers to the fact that the plan must provide sufficient detail about the proposed expenditure to allow the immigration department to audit the company’s performance against the plan.
Tip – Creating a business plan will provide an organisation chart that can form the bare bones of an auditable training plan, allowing an individual training agenda to be created for each position.
Tip - When the business applies for sponsorship renewal, the business will need to demonstrate that they have met their training commitments
Sponsorship Period and Visa approval period
It is important to note that the period of Sponsorship approval will be 18 months for a business operating for less than 12 months. This differs to the sponsorship approval period for established businesses, which under policy are generally granted for up to 5 years (or 6 years for Accredited Sponsors). Additionally, subclass 457 visa applicants that are nominated by the company will also be granted a maximum visa period of 18 months.
Tip – In light of the above, it is prudent to factor in the need for the business to apply for a new Standard Business Sponsorship application once they have traded for 12 months. This would allow a sponsorship approval period of up to 5 years. At that stage, the company can also lodge fresh nominations for its existing 457 visa holders and ensure fresh visa applications are also lodged to providing visa holders (and future sponsored employees) visas with the maximum 4 year visa approval period.
OVERSEAS BUSINESS SPONSORS
Companies operating outside Australia can apply to become a visa sponsor to nominate experienced individuals under the 457 visa program to assist in:
• establishing, or assisting in establishing, a business operation in Australia with overseas connections; or
• fulfilling, or assisting in fulfilling, a contractual obligation of the applicant
A main differentiating factor to consider for overseas companies applying for sponsorship is that the requirement to demonstrate staff training expenditure does not apply and there are no associated training obligations that apply.
In addition, where visa sponsorship has been granted on the basis of fulfilling contractual obligations, the sponsorship may be granted with a validity period fixed to the timeline of those obligations. Visa validity periods may also be affected accordingly. Otherwise, the standard business sponsorship can be approved for a period of up to 5 years, for established businesses.
Tip – In cases where an Australian subsidiary is being established, having an overseas parent company apply to sponsor visas can be a useful strategy in getting people on the ground where the subsidiary is already partly established but there may be difficulties in demonstrating that it is operational (thus preventing the subsidiary from becoming a visa sponsor in its own right).
Tip - Using an overseas company as a sponsor does not prevent the newly established Australian subsidiary from applying to become a visa sponsor once it is able to demonstrate it is operational and meets the other criteria. This would set the stage for a long-term visa solution, but bear in mind that this strategy may require the 457 visa holders sponsored by the parent company to be re-nominated by the new subsidiary.
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