Enhanced Integrity Act – Avoiding Naming & Shaming

The Migration and Other Legislation Amendment (Enhanced Integrity) Act 2018 (Enhanced Integrity Act) came into effect on 13 December 2018 to significantly strengthen sanctions against employer sponsors who breach obligations. Maria Jockel, National Leader and Legal Principal, outlines here what directors and boards need to know about the legislation, which is retrospective to 2015 and carries penalties for breaches.

1. What is the effect of the Enhanced Integrity Act?

The ever-growing world of regulations and data matching means company directors must swim with the tide, understand the legislation, adopt better governance and risk oversight, and avoid brand damage and director liabilities while continuing to meet skilled workforce needs.

The Migration and Other Legislation Amendment (Enhanced Integrity) Act 2018 (Enhanced Integrity Act) came into effect on 13 December 2018 to significantly strengthen sanctions against approved employer sponsors who breach applicable obligations under the Subclass 457 and its replacement the Subclass 482 Temporary Skill Shortage (TSS) visa program.

The Enhanced Integrity Act and the establishment of the Department of Home Affairs and the Australian Border Force as its operational independent enforcement arm, reflect Australia’s commitment to a strong regulatory and compliance regime as part of the Migration Program.

The Enhanced Integrity Act allows the Minister of Home Affairs to publish information, including personal information about an approved sponsor or former sponsor who has breached and failed to meet applicable Sponsorship Obligations.

The Enhanced Integrity Act provisions are retrospective as they allow for actions that were undertaken under the relevant provisions that occurred on or after 18 March 2015 to be published.

This means that the Minister of Home Affairs may publish sanctioned actions that have been undertaken on or after 18 March 2015.

2. Are there implications for director liability under the new Enhanced Integrity Act and if so what are they?

The implications for director liability under the new Enhanced Integrity Act are significant as the consequences of “naming and shaming” impacts adversely not only on the business but its directors.

No one wants to be named and shared or suffer the financial, reputational and brand damage that is likely to follow.

The Department of Home Affairs, together with the Australian Border Force, has a broad range of powers to monitor and investigate possible non-compliance with Sponsorship Obligations and a range of measures to address identified breaches of obligation.

The Department of Home Affairs continues to advance its digital processing model, including lodgement, assessment and decision-making on visa applications, all of which are lodged online and allow for great information to be collected, data matched, and analysed.

Data matching is increasingly being used by Commonwealth and State agencies to effectively detect and deal with compliance risks through the use of risk detection models and to improve decisions, services and compliance.

Directors must be aware of the “Data Matching Program to Enhance Compliance in the Temporary Skilled Visa Program” which came into effect in January 2019 and allows the Department of Home Affairs (through its independent operational enforcement arm, the Australian Border Force) to exchange data with the ATO to “effectively detect and deal with compliance risks in the temporary skilled visa program”.

This Data Matching Program will assist to identify:

• Temporary skilled visa holders who are not working in the occupation in which, or for the employer by whom, they were sponsored; and
• Sponsors who are breaching their sponsorship obligations by incorrectly paying temporary skilled visa holders.

3. What are the main risks of this retrospective legislation?

The Enhanced Integrity Act, together with the Data Matching Program, allows the Department of Home Affairs, the ATO and other agencies (including state and territory revenue agencies and law enforcement agencies) to undertake compliance activity relating to visa holders, sponsors and migration agents.

With the ATO providing to the Department of Home Affairs the tax file numbers (TFN) of visa holders or former visa holders across the temporary and permanent skilled visa programs, the Department of Home Affairs will have access to records going back to March 2015.

Where there is a match, the ATO will return income and employment data for the relevant individual/s and business to the Department of Home Affairs on a periodic basis, so that historic breaches can be identified and actioned, including by the Australian Border Force which undertakes Sponsor Monitoring and has extensive powers and reach, including through interviews, site visits, desk auditing, referral to other agencies and other sections of the Home Affairs’ Portfolio.

Non-compliance with sponsorship obligations from March 2015 can result in a range of measures including taking administrative action to bar or cancel the sponsorship approval, or to issue civil pecuniary penalties by way of infringement notices or take other such action including “naming and shaming”, depending on the nature of the breach.

4. In what ways are the levels of regulator scrutiny increasing and what does this mean for directors in the migration area?

It is estimated that around 680,000 records representing some 280,000 individuals will be available in the first data exchange (first quarter) of the Data Matching Program for the years 2017 to 2020 of Subclass 457/482 primary visa holders.

The ATO provides data to the Department of Home Affairs on:

• Income details from Income Tax Returns and Payment Summaries;
• Employment details from TFN Declarations, Income Tax Returns and Payment Summaries;
• ABNs for all employers who issued the visa holder a payment summary, or who the visa holder has declared on their TFN Declaration or Income Tax Return; and
• Related data from Single Touch Payroll.

Data matching will help to identify: Where ATO data shows that income declared to the ATO is less than what the approved sponsor was to pay to a visa holder;

• Where ATO data shows that a visa holder has received income from multiple employers; and
• Where the visa holder may be working in an occupation other than an approved occupation.

This significant level of regulator scrutiny, which will continue to increase over time, heightens director responsibilities in the migration area.

It requires directors to be aware of the extensive data which is provided to the Department of Home Affairs when a business sponsors overseas workers including under the new Temporary Skilled Shortage (Subclass 482) Visa Program where all applications are lodged online and allow for information to be collected, data matched and analysed on a large scale.

The collection and use of TFNs of skilled migrants for compliance purposes and sharing of data with the ATO and the publication of personal information about an approved sponsor or former sponsor and its directors, who have failed to meet applicable Sponsorship Obligations makes it essential for directors to ensure that they understand, mitigate and manage risk, and ensure regulatory compliance.

5. Does the legislation mean that better governance and risk oversight is needed? If so please explain why.

It is vital that there is better governance and risk oversight as the Department of Home Affairs, the Australian Border Force and the ATO have extensive data matching programs, processes and risk matrices as part of administration, compliance and related activities. They enable the identification of visa holders who do not comply with their visa conditions and sponsors/businesses who do not comply with their sponsorship obligations. The legislation therefore enables the identification of potential breaches, non-compliance and related activities.

The introduction of the Single Touch Payroll Reporting provides the ATO with real-time payroll data and therefore the opportunity to quickly identify and act on any anomalies of non-compliance.

The 2019/2020 Budget will provide $82.4 million to support the expansion of data collected through Single Touch Payroll Reporting by the ATO and enhance data matching capabilities for Commonwealth agencies, including the Department of Home Affairs.

From 1 July 2020, all businesses, including those employing less than 20 staff, must comply with the Single Touch Payroll Rules.

Boards, Directors, Senior Managers and Shareholders must create a corporate culture requiring compliance or suffer the consequences of “naming and shaming”, reputational and brand damage.

It is no longer a simple process of applying for a visa or becoming an approved sponsor but rather, whole of enterprise risk management system and corporate culture which requires an understanding of the increasingly complex regulatory framework, and measures which ensure better governance and risk oversight. For further information, please contact Maria Jockel on maria.jockel@bdo.com.au.