Skilling Australians Fund (SAF) Levy - Introduction
The SAF Levy is a cornerstone of Australia’s strategy to balance the immediate need for skilled overseas workers with the long-term goal of developing a robust and capable local workforce. By requiring employers to contribute to the Skilling Australians Fund, the government ensures that businesses are not just importing skills but are also investing in the domestic labor market.
The SAF Levy has undergone significant changes and transformations, reflecting the Australian Government’s evolving commitment to addressing skills shortages and fostering workforce development from the time its implimented. Originally established to ensure that businesses benefiting from skilled migration also contribute to local skills training, the SAF Levy has been central to various funding agreements and initiatives aimed at enhancing vocational education and training (VET) across the country. Over the years, from supporting state and territory partnerships to enabling fee-free TAFE programs, the SAF Levy has continuously adapted to meet the nation’s growing demand for a skilled and capable workforce.
July 1, 2018 – June 30, 2022:
- The SAF Levy supported the National Partnership on the Skilling Australians Fund. This was an agreement between the Australian Government and six State and Territory governments to fund skills, training, and apprenticeship projects.
Late 2022:
- The Australian Government initiated a new partnership with all State and Territory governments to launch the $1 billion 12-Month Skills Agreement. This agreement provided 180,000 Fee-Free TAFE and vocational education places for 2023, focusing on sectors of national priority such as care, technology, hospitality, construction, agriculture, and sovereign capability.
October 16, 2023:
- The National Cabinet endorsed a National Skills Agreement, set to commence in January 2024. This agreement involves an investment of up to $12.6 billion over five years to enhance Australia’s vocational education and training (VET) system. Additionally, the government announced more than $400 million to deliver 300,000 additional Fee-Free TAFE and vocational education places from 2024 to 2026, bringing the total VET investment to approximately $13 billion over five years.
Since its introduction, there have been ongoing discussions about the SAF Levy, particularly regarding its payment terms. Some stakeholders have argued that the upfront payment requirement imposes a significant financial strain on businesses, particularly smaller enterprises. In response, there have been proposals to allow employers to pay the levy in installments rather than as a lump sum. This change, if implemented, would provide businesses with greater flexibility in managing their cash flow while still fulfilling their obligations under the SAF Levy.
What is SAF Levy?
The Skilling Australians Fund (SAF) Levy is a financial measure introduced by the Australian government to ensure that employers sponsoring overseas workers contribute to the development of the local workforce. Established in 2018, this levy is part of a broader strategy to address Australia’s skills shortages by financing training and apprenticeship programs for Australian citizens. By doing so, the government aims to create a more skilled and sustainable workforce capable of meeting the demands of the economy.
The SAF Levy is more than just a financial obligation,this fund was established to support various vocational education and training (VET) programs, with a specific focus on apprenticeships, traineeships, and other forms of upskilling for Australian workers.By requiring businesses to pay this levy when they choose to hire overseas talent, the government can ensure that these companies also invest in the local labor market. This dual focus on both meeting immediate skill needs through overseas workers and developing long-term domestic capabilities is central to Australia’s workforce strategy.
Who is Required to Pay the SAF Levy?
The SAF Levy applies to a range of visa programs under which Australian employers can sponsor overseas workers. Specifically, it is mandatory for employers sponsoring workers under
Temporary Skill Shortage (TSS) visa (subclass 482)
Employer Nomination Scheme (ENS) visa (subclass 186)
Regional Sponsored Migration Scheme (RSMS) visa (subclass 187).
These visa categories include both temporary and permanent employer-sponsored visas, reflecting the levy’s comprehensive scope. Whether a business is looking to fill short-term skill gaps or bring in permanent additions to their workforce, they are required to contribute to the SAF.
SAF Levy Rates by Business Size and Visa Type
The SAF Levy is structured to vary based on two key factors: the size of the sponsoring business and the type of visa being sponsored. This approach ensures that the financial contribution aligns with the business’s capacity and the visa’s duration.The SAF Levy imposes different rates for small and large businesses.
The tiered structure ensures that businesses contribute to the fund proportionally based on their financial capacity. Larger businesses, with greater financial resources, contribute more, reflecting their ability to support both the local workforce and their overseas employees.By imposing a lower levy on small businesses, the system recognizes the challenges these businesses face in sponsoring overseas talent. This approach helps small businesses remain competitive in the market, enabling them to access the skills they need without being overburdened by the levy.
Levy payments can be claimed as tax deductions. Sponsors involved in a labor agreement are required to pay the levy. However, ministers of religion and religious assistants nominated under the Labour Agreement streams of the TSS or ENS visas are exempt from this requirement.
SAF Levy Refund Conditions
Employers must pay the levy upfront when they lodge the nomination application for the overseas worker. .Refunds of the SAF Levy are generally limited and are only available under specific circumstances. If an employer has already had their nomination approved, the SAF Levy, or a portion of it, can only be refunded in a few particular scenarios. These scenarios include situations where the nomination is withdrawn before any other decision is made, such as if the employer provided incorrect information or if the nomination is withdrawn in the labor agreement stream before entering into the agreement.
The table below outlines the specific circumstances under which a SAF Levy refund may be considered:
It’s important to note that these refund scenarios are specific, and refunds are only provided under these limited circumstances. Additionally, certain scenarios, such as ENS or RSMS visa holders leaving their employer within the first 12 months, do not qualify for a refund.
Impact on Employers and the Labor Market
The introduction of the SAF Levy has had significant implications for employers in Australia. One of the most immediate effects has been the increase in the cost of sponsoring overseas workers. This has led many businesses to reassess their hiring strategies, particularly in industries where the need for skilled labor is acute but where the financial impact of the levy might be substantial.By contributing to the Skilling Australians Fund, businesses are indirectly supporting the training and development of Australian workers, which can help address the root causes of skills shortages in the long term. This dual approach of meeting immediate needs through overseas talent while building domestic capabilities ensures that Australia remains competitive in the global economy.
