1404685 (Migration)

[2015] AATA 3352

1404685 (Migration) [2015] AATA 3352 (18 August 2015)

DECISION RECORD

DIVISION:Migration & Refugee Division

APPLICANTS:  Mr Junfeng Shan
Ms Jing Zhang
Ms Jue Shan
Master William Shan

CASE NUMBER:  1404685

DIBP REFERENCE(S):  CLF2013/194181 CLF2013/194184 CLF2013/194186

MEMBER:Jennifer Ciantar

DATE:18 August 2015

PLACE OF DECISION:  Sydney

DECISION:  The Tribunal affirms the decision not to grant the applicants Business Skills (Residence) (Class DF) visas.

Statement made on 18 August 2015 at 9:53am

STATEMENT OF DECISION AND REASONS

APPLICATION FOR REVIEW

1. This is an application for review of a decision made by a delegate of the Minister for Immigration on 21 February 2014 to refuse to grant the visa applicants Business Skills (Residence) (Class DF) Subclass 890 visas under s.65 of the Migration Act 1958 (the Act).

2. The applicants applied for the visas on 15 August 2013. The visa application indicates that Sun Holidays Pty Ltd is the main business. The delegate treated the applicant as a travel agent and deducted the cost of sales from the turnover. The delegate refused to grant the visas on the basis that cl.890.213 was not met. The delegate found that after the cost of sales was deducted, the turnover of the business was $69,919 in 2012 and $162,049 in 2013, which was less than a turnover of $300,000 in the 12 months immediately before the application was made.

3. The first named applicant (the applicant) appeared before the Tribunal on 29 January 2015 and 4 August 2015 to give evidence and present arguments.

4. The applicants were represented in relation to the review by their registered migration agent. The representative attended the Tribunal hearing.

5. At the first hearing, the applicant gave evidence that his business is that of an Inbound Tour Operator (ITO), which is different to a travel agent. He makes arrangements for accommodation, meals, internal travel and tours for tour groups from China but it is his business which has contracts with Australian providers, and contracts with tourist groups who come from China, and it is Sun Holidays that bears the risk. The business has insurance for this reason. The applicant submitted that the total trading income of $710,993.78 in the 12 months prior to the lodgement of the application, that is, 15 August 2012 to 14 August 2013, should be accepted as turnover and the cost of sales, which was $518,159.92, should not be deducted.

6. The representative provided the Tribunal with information from the ATO regarding the treatment of inbound tour operators, which is the based on the findings of the Federal Court in ATS Pacific Pty Ltd v Commissioner of Taxation, (provided to the Tribunal) and also drew the Tribunal’s attention to the Department’s policy regarding the definition of turnover.

7. After the hearing the applicant provided further documents including agreements with Australian service providers such as hotels and tour operators, copies of some contracts he had with clients in China in the 12 months immediately prior to the lodgement of the visa application, financial information for the period 1 July 2013 to 15 August 2013 and a submission regarding the difference between the applicant’s business and that of the applicant business in Cheng v MIAC.

8. On 3 June 2015 the Tribunal invited the applicant to provide information to show that the ATO either now and/or previously treats the main business as a principal and not as an agent. This could include, but is not limited to, BAS statements, correspondence with the ATO or additional payments that the ATO required following ATS Pacific Pty Ltd v Commissioner of Taxation. The Tribunal also invited the applicant to provide information about the tours or business which provided the trading income of $710,993.78.

9. On 12 June 2015 the applicant provided the Tribunal with bank statements for the main business for the period August 2012 to August 2013 showing payments made to the company with the supporting accounting ledger which shows credit payments that total $710,993.78.

10. At the second hearing the applicant’s representative stated that he had requested time to provide more documents in response to the Tribunal’s letter of 3 June 2015 but he had not received a response. The Tribunal indicated no request had been received. The applicant’s representative stated that the BAS would show that the business has to pay GST on all supplies because it is treated as an ITO by the ATO. He could provide this information immediately after the hearing.

11. The Tribunal discussed with the applicant the ‘cost of sales’ items in the financial statements that had been provided. The Tribunal also put to the applicant that despite requests, he not provided all the contracts which show all of the sources of income in the 12 months prior to the lodgement of the application; to date only 2 contracts with China based companies have been provided. The applicant said that now that he understands why this information is required, he will provide it.

12. The applicant then stated that when the visa was refused he lost motivation and it had been difficult for the business to operate since the change of government in China. The Tribunal asked the applicant if the business is still actively operating in Australia, as this is a time of decision requirement. The applicant stated that the business is not operating at this time. He did not know if he would be granted a visa and he had to send his daughter back to China for her education, which has been very upsetting. He accompanied his daughter and while in China, the applicant did visit contacts and he looked for potential customers so that he can reactivate the business if he is granted the visa. Although he is not motivated he could restart the business. Since the end of 2014 he has spent about 1 month in Australia and has otherwise been in China.

13. The applicant stated that he last bought a tour group from China to Australia around the time that the visa was refused. Although the business is still registered, he stopped renting premises or employing any staff around the time he returned to China in late 2014. He used to employ 2 staff and one person finished their employment when the office closed at the end of 2014 and the other person had finished 6 or 12 months earlier, perhaps in March 2014 around the time that the visa was refused.  

14. The Tribunal put to the applicant that it is concerned that the business is not currently actively operating in Australia. It would be futile for the Tribunal to remit the application on the basis that the applicant satisfied a time of application requirement if the Tribunal forms the view that a time of decision requirement is not satisfied. The applicant said that the business is still operating in that he is laying the foundations in China and although there is no activity, he has lodged BAS in 2015. He wants to provide the documents that the Tribunal discussed at the start of the hearing. The Tribunal indicated that it might be a waste of time and money for the applicant to provide these documents if the business is not actively operating in Australia, at the time of the Tribunal’s decision. The Tribunal also indicated that it might not accept that laying the foundations in China for the business to restart means that the business is actively operating in Australia. The applicant said he strongly disagrees with the delegate’s decision and wants to show it was wrong. The Tribunal indicated that if it finds a time of decision requirement is not met then it may not be necessary for the Tribunal to make findings about the issue in dispute.

15. The applicant also asked the Tribunal to consider referring the matter for Ministerial Intervention should the application be refused. The applicant and his wife first came to Australia in December 2010 for a month and then they returned to Australia on 1 April 2011. In the next 2 years they only returned to China once. He and his wife have purchased a house in Australia and they have 2 children. Their son was born in March 2013 and the applicant’s wife has not worked since then. The applicant’s children are currently staying with their grandparents in China.

16. On 12 August 2015 the applicant provided the Tribunal with additional information relevant to the 12 months prior to the lodgement of the application including financial statements, BAS, sales ledger breakdown and costs of sales invoices. 

17. For the following reasons, the Tribunal has concluded that the decision under review should be affirmed.

    CONSIDERATION OF CLAIMS AND EVIDENCE

18. At the time the visa application was lodged, the Business Skills (Residence) Class DF visa contained four subclasses: subclass 890 (Business Owner), subclass 891 (Investor), subclass 892 (State/Territory Sponsored Business Owner) and subclass 893 (State/Territory Sponsored Investor). The visa applicants have made claims in relation to subclass 890 and subclass 892 (MRT file 1008453).

19. The criteria for a subclass 890 visa are set out in Part 890 of Schedule 2 to the Regulations. At least one member of the family unit must satisfy the primary criteria.

20. The primary criteria include the following requirements at time of application:

    ·The applicant has had, and continues to have, an ownership interest in one or more actively operating main businesses in Australia for at least two years immediately before the application is made: clause 890.211(1).

    ·for each business to which cl.890.211(1) above applies, an Australian Business Number (‘ABN’) has been obtained; and all Business Activity Statements (‘BAS’) required by the Australian Taxation Office (the ATO) for the period mentioned in cl.890.211 have been submitted to the ATO and have been included in the application: clause 890.211(2). 

    ·The net value of the assets of the applicant, of his or her spouse or of the applicant and the spouse together in the main business or main businesses in Australia is, and has been throughout the 12 months immediately before the application is made, at least $100,000: clause 890.212.

    ·In the 12 months immediately before the application is made, the main business or main businesses had a turnover of at least $300,000: clause 890.213.

21. At the time of the decision, the applicant must continue to satisfy the primary criteria in clause 890.211, 890.215 and 890.216: clause 890.221.

22. The delegate refused the application on the basis that cl.890.213 was not met. Departmental guidelines (PAM3) on ‘turnover’ relevantly state that “turnover is the revenue generated by an entity as a result of the ordinary activities of the business” and it includes the sale of goods and can include fees for services provided and commission revenue. However, revenue excludes amounts collected by an agent on behalf of a principal such as might be collected by a travel agent. In Cheng v MIAC[1] the Court upheld the tribunal’s finding that a business acting as an intermediary between two other businesses, and not as a merchant in its own right, could only claim the commissions it was paid as constituting its ‘turnover’.

    [1] [2012] FMCA 911 (Driver FM, 16 November 2012). This finding was upheld on appeal by the Federal Court in Cheng v MIAC [2013] FCA 405 (Cowdroy J, 6 May 2013).

23. Prior to the second hearing, the Tribunal spent a considerable amount of time giving consideration to whether the applicant’s business is that of an Inbound Tour Operator (ITO) and whether this can be distinguished from that of a travel agent. The Tribunal accepts that following the full Federal Court decision of ATS Pacific Pty Ltd v Commissioner of Taxation [2013] FCA 341, the ATO treats ITOs as principals and not as agents, for GST purposes. The applicant claims that the BAS he has provided show that the ATO treated the business as an ITO and a principal.

24. However, following Cheng, the Tribunal must consider the substance of the transactions when assessing turnover. At the second hearing the Tribunal explained to the applicant that it had insufficient information about the contracts that generated the income or about the breakdown of the cost of sales. The applicant has since provided numerous documents to show that the main business had contracts with the Australian service providers and it also had contracts with the non-resident travel agents who provided the tourists. The applicant has not provided any analysis of the documents and although it may be that on the basis of the information provided the Tribunal might accept that the applicant is an ITO who pays GST on all supplies, and that the applicant has contracts with Australian providers and bears the risk, the Tribunal has not made findings about whether the requirements of cl.890.213 are met, for the following reasons.

25. Clause 890.221 requires an applicant to continue to satisfy the primary criteria in cl.890.211, at the time of decision. Clause 890.211(1) requires an applicant to have had, and to continue to have, an ownership interest in one or more actively operating main businesses in Australia for at least two years immediately before the application is made.

26. The Tribunal is prepared to accept that the applicant still has an ownership interest in the main business but the Tribunal does not accept that the main business is actively operating in Australia.  ‘Operating a business’ implies ongoing regular activities. The applicant has given oral evidence that he ceased actively operating the business at the end of 2014, some 8 months ago. He ceased renting premises or employing staff. He has not facilitated a tour group coming to Australia for more than a year. Although the business is still registered and the applicant claims to have lodged BAS in 2015, the Tribunal is not satisfied that the business has had any turnover or revenue in the last 2 quarters, or that the business has been active in Australia. The Tribunal is not satisfied that activities in China which the applicant describes as laying the foundations for future business, amount to the business actively operating in Australia.

27. As the applicant does not have an ownership interest in one or more actively operating main businesses in Australia, the applicant does not continue to satisfy the criteria in cl.890.211 at the time of decision. The Tribunal therefore finds that the requirements of cl.890.221 are not met.

    Request for referral for Ministerial intervention

28. The applicants have requested that the Tribunal refer the case to the Department for consideration by the Minister pursuant to s.351 which gives the Minister a discretion to substitute for a decision of the Tribunal another decision that is more favourable to the applicant, if the Minister thinks that it is in the public interest to do so.

29. The Tribunal accepts that the applicants have invested financially and emotionally in making Australia their home. The Tribunal has considered the applicants’ case and the ministerial guidelines relating to the discretionary power set out in PAM3 ‘Minister’s guidelines on ministerial powers (s345, s351, s391, s417, s454 and s501J)’ but has decided not to refer the matter. The Tribunal notes that the applicants can still make a request directly to the Minister.

    CONCLUSIONS

30. There has been no material submitted by the applicants, or which is otherwise available to the Tribunal, which would support a conclusion that any other applicant for the visa would meet the requirements of cl.890.221.

31. Neither has it been submitted, nor is there any material otherwise known to the Tribunal, which would support a conclusion that any applicants meet requirements prescribed at Parts 891, 892 or 893 of Schedule 2 to the Regulations. This being the case, the Tribunal is not satisfied that the applicants meet essential prescribed criteria for any Class DF visa. The grant of such visas to them must be refused.

    DECISION

32. The Tribunal affirms the decision not to grant the applicants Business Skills (Residence) (Class DF) visas.

    Jennifer Ciantar
    Member