AFK INTERNATIONAL PTY LTD (Migration) - [2018] AATA 507

AFK INTERNATIONAL PTY LTD (Migration) [2018] AATA 507 (2 March 2018)

DECISION RECORD

DIVISION:Migration & Refugee Division
APPLICANT:  AFK INTERNATIONAL PTY LTD
CASE NUMBER:  1702399
DIBP REFERENCE(S):  BCC2016/1708001
MEMBER:Hugh Sanderson
DATE:2 March 2018
PLACE OF DECISION:  Sydney
DECISION:The Tribunal affirms the decision under review to refuse the nomination.

Statement made on 02 March 2018 at 2:44pm

CATCHWORDS

Migration – Nominating Sponsor – Financial capacity to pay for the full-time salary for the nominated position – Significant net liabilities

LEGISLATION

Migration Act 1958, s 359
Migration Regulations 1994, r 1.19, 5.19

STATEMENT OF DECISION AND REASONS

APPLICATION FOR REVIEW

This is an application for review of a decision made by a delegate of the Minister for Immigration on 2 February 2017 to reject the applicant’s application for approval of the nomination of a position in Australia under r.5.19 of the Migration Regulations 1994 (the Regulations).
The applicant applied for approval on 11 May 2016. The requirements for the approval of the nomination of a position in Australia are found in r.5.19 of the Regulations, which contains two alternative streams: a Temporary Residence Transition nomination (r.5.19(3)) stream and a Direct Entry nomination (r.5.19(4)) stream. If the application is made in accordance with r.5.19(2) and meets the requirements of either stream, then the application must be approved. If any of the requirements are not met then the application must be refused: r.5.19(5).
In this case, the applicant has applied for approval of a nomination, seeking to satisfy the criteria in the Temporary Residence Transition nomination stream.
The delegate refused the application on the basis the applicant’s nomination did not satisfy r.5.19(3)(d)(i) of the Regulations because the delegate was not satisfied that the person who was identified as the visa holder would be employed on a full-time basis in the position for at least two years.

Background

The applicant stated that it was involved in the wholesale trade industry. It nominated Mozibar Mohammad for a subclass 186 Employer Sponsored Nomination Scheme visa on the basis of employing Mr Mohammad in the position as an importer (ANZSCO 133311). It was stated that he would receive the base rate of pay of $58,000 per annum. The applicant provided various financial records in support of the application including the financial reports of the applicant from June 2011 until June 2016.
The delegate who considered the application noted the following issues:

The financial report for the year ending June 2016 showed the applicant suffered a net loss of $127,388 and the assets and liabilities of the applicant disclosed net liabilities of $242,905;
The financial records for the year ending June 2015 showed the applicant suffered a net loss of $53,961 and had net liabilities of $115,515 indicating a continuing degeneration of the applicant’s financial position and trading viability; and
The losses sustained and the significant liabilities of the applicant called into question the capacity of the applicant to employ the nominee on a full-time basis for at least two years.

Taking these matters into account, the delegate was not satisfied that the business had the financial capacity to pay the full-time salary for the nominated position for at least two years. Accordingly, the delegate found that the nomination did not meet the criteria in reg.1.19(3)(d)(i) and refused the application.

Information to the Tribunal

The applicant applied for a review of the decision of the Department. The applicant provided a copy of the Department’s decision. No further information was provided by the applicant in support of the review application.
The Tribunal wrote to the applicant on 13 February 2018 pursuant to s.359(2) of the Act, inviting the applicant to provide updated and current information addressing the criteria for the granting of the nomination approval. The applicant was required to respond to this invitation by 27 February 2018.
The applicant did not respond to the Tribunal within the stated time. The applicant’s agent contacted the Tribunal on 28 February 2018 requesting an extension of time to provide information. The basis of that application was that ‘the accountant has been preoccupied with preparing his other clients’ December 2017 quarter BAS statements, which are due to be lodged today’. The Tribunal advised the applicant’s agent that the applicant had lost any entitlement to a hearing and would not extend the time for providing information, but would take into account any information the Tribunal had at the time of this decision.
The applicant provided further material and submissions on 1 March 2018. This included the following:
·    Organisational Chart;
·    PAYG statements for the years, 2014, 2015 and 2016;
·    Tax assessment for the visa applicant for the year 2016 showing a taxable income of $50,729 and 2015;
·    Employment contract;
·    Emails to the visa applicant ordering goods dated 24 February 2018 and 27 February 2018;
·    Business Activity Statements and Instalment Activity Statements; and
·    Details from another sponsorship and visa application.
The applicant’s agent made submissions in support of the application including the following:
·    The applicant commenced operations in September 2005 to import food stuff, mainly from Bangladesh;
·    The director, Mr Khan, is also the owner and director of a business, trading as Family Needs Supermarket, and approximately 30% of the imported food is sold through this supermarket with the balance to other retailers;
·    The applicant’s refrigeration unit broke down in late 2015 which affected his profitability;
·    The applicant was the sponsor of another nominee, Mr Uzzal, for the position of a Supply and Distribution Manager and that nomination was approved and the visa granted on 14 March 2017 which shows the Department has already assessed the applicant as meeting the nomination criteria;
·    Unfortunately, Mr Uzzal ceased working with the applicant in June 2017, three months after he was granted the visa which explained why he was not on the current organisational chart; and
·    The 359(2) letter should be sent again because there were missing words on the second page of the letter.
For the following reasons, the Tribunal has decided to affirm the decision under review to refuse the nomination.

CONSIDERATION OF CLAIMS AND EVIDENCE

The issue in this case is whether the applicant meets the requirements for approval of the nomination under the Temporary Residence Transition nomination stream set out in r.5.19(3), which is extracted in the attachment to this decision. For the nomination to be approved, all the requirements must be met. The Tribunal has first considered the issue identified in the Department’s decision that the nominee will be employed by the applicant on a full-time basis for at least two years in the nominated position.

Validity of the 359(2) letter

In submissions from the applicant’s agent, the applicant’s agent requested that the 359(2) letter sent to the applicant on 13 February 2018 be reissued as there was text missing at item 7b on page 2 of that letter. The Tribunal did not reissue the letter and the Tribunal does not accept that the missing text in any way affected the validity of the letter.
The letter is clear that there was no limiting the information that may be given in response to the requirement to provide updated and current information. The missing text is a starting date to provide information about whether the nominee holds a 457 visa and details of his employment. The Tribunal does not accept that the omission of the period to consider that information adversely affects the validity of the notice.

Future employment of the visa holder: r.5.19(3)(d)

Regulation 5.19(3)(d) only applies to certain nominees (those described in r.5.19(3)(c)(i)). For this class of person, the regulations require that the nominee will be employed on a full time basis for at least two years on terms that do not expressly preclude the possibility of an extension.
The Tribunal has considered whether the financial status of the applicant is such that it would allow him to employ the nominee on a full-time basis for at least two years on the term stated.
The applicant has provided only limited information as to its financial position. The applicant has not provided any updated financial information as to its current financial status. The documents provided by the applicant to the Tribunal are from the financial year ending June 2016 or earlier. The applicant had previously provided most of these documents to the Department.
The applicant provided financial reports that showed its financial position for the years from 2011 to 2016. Based on the financial reports provided, the last time the applicant made a net profit after tax was in 2012 in the sum of $15,858.
The financial report for the year ending 30 June 2016 shows the financial position of the applicant for the years ending June 2015 and June 2016. The gross profit of the applicant in 2015 was $549,517. The gross profit for the year ending June 2016 was $380,719, a reduction in the sum of $168,798. The ‘administration expenses’ claim for those financial years are unusual in that the figure for each individual item claimed is exactly the same for both financial years. Despite this, the total administration expenses for the year ending June 2016 is stated to be $508,107 and for the year ending June 2015 is $603,478. The correct total of the administration expenses based on the items identified is $603,478.
The net trading result for the year ending June 2015 was stated to be a loss of $53,961. For the year ending June 2016 it was a net loss of $127,388. If the itemised total administration expenses are taken into account, the actual loss for the year ending June 2016 would be $222,759. For the purposes of this decision, however, the Tribunal accepts that the itemised administration expenses are an error and that the actual administration expenses, which are not accurately disclosed, total only $508,107. As the most significant administration expenses for the company are the payments for salaries it would be anticipated that the majority of the reduction in the sum of $95,371 would indicate a reduction in the salaries paid over that year.
The business has significant net liabilities. The net assets of the business in 2013 were stated to be $10,898. In 2015, the applicant had net liabilities of $115,515. The net liabilities in June 2016 were $242,905. The bank statements provided by the applicant for the period from 30 September 2015 to 29 January 2016 show that it had an overdraft limit of $200,000 and was operating near to or exceeding that limit throughout the period.
When the overall financial position of the applicant is considered, there is insufficient evidence that the applicant has the financial capacity to pay the full-time salary for the nominated position for at least two years. The business is currently operating at a net loss and has been doing so for a number of years. The applicant’s net liabilities have been increasing and both the net liabilities and the net trading loss are significant. The gross profit of the business suffered a significant reduction in performance from the 2015 to 2016 financial year. Although there is no clear identification as to why the administration expenses have decreased by $95,371 as discussed above, it is likely that the salaries paid by the applicant in 2016 have reduced indicating a reduction in staff level or pay to staff. The undated organisational chart shows that apart from the Managing Director the only employees are the visa applicant, a part-time ‘Delivery’ and a part-time ‘Office Assistant’. In such a small operation, no description is provided as to the tasks of the Managing Director. It is noted the director is also the director of another company, Family Needs Supermarket, and this company is provided with 30% of the imported food sold by the applicant. No details are provided as to the amount of time the director spends at that supermarket or involved in the business of the applicant.
The fact that the Department may have approved the applicant as the nominator for another person, Mr Uzzal, for the grant of a subclass 186 Temporary Residence Transition visa is not relevant when considering the current application. The Tribunal is not bound by any decision of the Department. In assessing the current application, the Tribunal has considered all the information before it in respect of the current nomination application. The fact that Mr Uzzal was granted the visa on 14 March 2017 but then ceased worked with the applicant in June 2017 gives further cause for concern that the applicant has the capacity to employ the visa applicant on a full-time basis in the position for at least two years. As there is no information as to why Mr Uzzal ceased work for the applicant the Tribunal places no weight on this fact when considering the current application.
The Tribunal has noted the business organisation of the director of the applicant. The Tribunal notes that the director of the applicant operates a second business as a retail supermarket and that 30% of all products imported by the applicant are then provided to that supermarket. No information has been provided as to the financial viability of that business and the Tribunal places no weight on the tied relationship between the applicant and the director’s other business as supporting the claim that the applicant would employ the visa applicant on a full-time basis in the position for at least two years.
The Tribunal has taken into account the additional expense incurred by the applicant as a result of his refrigeration unit breaking down. This does not of itself, however, provide adequate explanation as to the increasingly poor financial results reported by the applicant for the period from 2013 to 2016. The Tribunal is not satisfied that this explanation would indicate that the financial viability of the applicant is likely to improve in the future or that the applicant is in a financial position to be able to employ the visa applicant on a full-time basis in the position for at least two years.
After taking all these factors into account, the Tribunal is not satisfied that the person who is subject to the nomination will be employed on a full-time basis in the position by the applicant for at least two years.
Given the above findings, the requirement in r.5.19(3)(d) is not met.
For the above reasons the Tribunal is not satisfied that the applicant meets the requirements of r.5.19(3). The applicant has not sought to satisfy the criteria in Direct Entry nomination stream, and as such has not met the requirements in r.5.19(4). Accordingly, the nomination of the position cannot be approved. Therefore, the Tribunal must affirm the decision under review.

DECISION

The Tribunal affirms the decision under review to refuse the nomination.

Hugh Sanderson
Member

ATTACHMENT - EXTRACTS FROM THE MIGRATION REGULATIONS 1994

5.19Approval of nominated positions (employer nomination)
…

The application must:
(a)be made in accordance with approved form 1395…; and
(aa) include a written certification by the nominator stating whether or not the nominator has engaged in conduct, in relation to the nomination, that constitutes a contravention of subsection 245AR(1) of the Act; and
(b)be accompanied by the fee mentioned in regulation 5.37.

Temporary Residence Transition nomination

The Minister must, in writing, approve a nomination if:
(a)the application for approval:
(i)     is made in accordance with subregulation (2); and
(ii)    identifies a person who holds a Subclass 457 … visa granted on the basis that the person satisfied the criterion in subclause 457.223(4) of Schedule 2; and
(iii)     identifies an occupation, in relation to the position, that:
(A)is listed in ANZSCO; and
(B)has the same 4-digit occupation unit group code as the occupation carried out by the holder of the Subclass 457 … visa; and
(b)the nominator:
(i)     is, or was, the standard business sponsor who last identified the holder of the Subclass 457 … visa in a nomination made under section 140GB of the Act or under regulation 1.20G or 1.20GA as in force immediately before 14 September 2009; and
(ii)    is actively and lawfully operating a business in Australia; and
(iii)     did not, as that standard business sponsor, meet regulation 1.20DA, or paragraph 2.59(h) or 2.68(i), in the most recent approval as a standard business sponsor; and
(c)either:
(i)     both of the following apply:
(A)in the period of 3 years immediately before the nominator made the application, the holder of the Subclass 457 …visa identified in subparagraph (a) (ii) has:
(I)held one or more Subclass 457 visas for a total period of at least 2 years; and
(II)been employed in the position in respect of which the person holds the Subclass 457 … visa for a total period of at least 2 years (not including any period of unpaid leave);
(B)the employment in the position has been full-time, and undertaken in Australia; or
(ii)    all of the following apply:
(A)the person holds the Subclass 457 … visa on the basis that the person was identified in a nomination of an occupation mentioned in sub-subparagraph 2.72(10)(d)(iii)(B) or sub-subparagraph 2.72(10)(e)(iii)(B);
(B)the nominator nominated the occupation;
(C)the person has been employed, in the occupation in respect of which the person holds the Subclass 457 … visa, for a total period of at least 2 years in the period of 3 years immediately before the nominator made the application; and
(d)for a person to whom subparagraph (c)(i) applies:
(i)     the person will be employed on a full-time basis in the position for at least 2 years; and
(ii)    the terms and conditions of the person’s employment will not include an express exclusion of the possibility of extending the period of employment; and
(e)the terms and conditions of employment applicable to the position will be no less favourable than the terms and conditions that:
(i)are provided; or
(ii)would be provided;
to an Australian citizen or an Australian permanent resident for performing equivalent work in the same workplace at the same location; and
(f)either:
(i)     the nominator:
(A)fulfilled any commitments the nominator made relating to meeting the nominator’s training requirements during the period of the nominator’s most recent approval as a standard business sponsor; and
(B)complied with the applicable obligations under Division 2.19 relating to the nominator’s training requirements during the period of the nominator’s most recent approval as a standard business sponsor; or
(ii)    it is reasonable to disregard subparagraph (i); and
Note Different training requirements apply depending on whether the application for approval as a standard business sponsor was made before 14 September 2009 or on or after that date.
(g)either:
(i)     there is no adverse information known to Immigration about the nominator or a person associated with the nominator; or
(ii)    it is reasonable to disregard any adverse information known to Immigration about the nominator or a person associated with the nominator; and
(h)the nominator has a satisfactory record of compliance with the laws of the Commonwealth, and of each State or Territory in which the applicant operates a business and employs employees in the business, relating to workplace relations.