Introduction of school fees for sub class 457 visa holders in Western Australia: Reducing the impact

The Western Australian Government has announced that it intends to require subclass 457 visa holders whose children attend public schools in WA to pay an annual fee of $4,000 per child from January 2014.

WA State Treasurer Troy Buswell has announced the controversial plan to charge the fee from next year.

He warned that children of 457 visa holders were putting “significant” pressure on the state’s education system.

Mr Buswell said 8,600 children holding subclass 457 visas were now attending WA schools, representing a sharp increase from just 290 students in 2005.

“That’s putting a significant strain on our school system,” he said.

“The simple growth in numbers has put massive pressure on the education system and by extension massive pressure on the balance of the taxpayers of WA… a big part of the drive in demand on education is those children.”

This policy change is being vigorously opposed by many 457 visaholders whose children are already enrolled in schools across WA, and who are paying Australian tax on their salaries.

However, it is possible for 457 visa holders to reduce the impact of the proposed fee by arranging with the employer for school fees to be salary packaged – ie for the school fees to be included within an overall gross salary package, with the employer paying the school fee to the school.

Salary packaged costs are usually subject to Fringe Benefits Tax (FBT) considerations, under which an employer is required to account for FBT on employer provided benefits delivered to employees.

However, there is a FBT exemption for the payment or reimbursement of a range of employer provided fringe benefits – including tuition fees, books, tutoring and excursion costs – relating to the full-time education of children aged less than 25 of an “overseas employee.”

Subclass 457 visa holders can reasonably consider themselves to be “overseas employees” under the FBT legislation.

Where an employer is agreeable to the salary packaging of education costs of 457 visa holders both parties benefit: the employee does not have to pay the costs from already taxed income, and the employer can find that payroll tax is also reduced.

For those who are interested, the legal position is discussed here.

GM Tax is a Registered Tax Agent in Australia, providing tax planning and Australian tax return services to subclass 457 visa holders who are living in Australia.

If you are a 457 visa holder and would like assistance with your tax affairs please contact us for a no obligation free initial discussion. Our fees are fixed in amount, and are agreed before you make any commitment to us.