Cheng (Migration)

[2019] AATA 6323

Cheng (Migration) [2019] AATA 6323 (19 December 2019)

DECISION RECORD

DIVISION:Migration & Refugee Division

APPLICANTS:  Jingxing Cheng
Xuejun Li

CASE NUMBER:  1815497

HOME AFFAIRS REFERENCE:               BCC2018/4063702 PNJ

MEMBER:Lilly Mojsin

DATE:19 December 2019

PLACE OF DECISION:  Sydney

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

Statement made on 19 December 2019 at 11.41am

CATCHWORDS
MIGRATION – Business Skills (Residence) (Class DF) visa – Subclass 890 (Business Owner) – minimum net value requirement – personal loans by directors and shareholders – unsatisfactory financial records – handwritten receipt – cash business – deponent failed to appear before the Tribunal in person – financial situation of business not fully disclosed – decision under review affirmed

LEGISLATION
Migration Act 1958 (Cth), s 65
Migration Regulations 1994 (Cth), Schedule 2, cl 890.212

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 11 May 2018 to refuse to grant the visa applicant a Business Skills (Residence) (Class DF) Subclass 890 visa under s.65 of the Migration Act 1958 (the Act).

2. The visa applicant applied for the visa on 20 December 2016. The delegate refused to grant the visa on the basis that the applicant’s and her spouse in the main business did not have a net value of $100 000 in the main business throughout the period of 12 months ending immediately before the application was made.

3. The applicants appeared before the Tribunal on 24 October 2019 to give evidence and present arguments. The Tribunal also received oral evidence from the applicant and her accountant Michael Chau.  The Tribunal did not take evidence from Jianxiong Cui, Jin Han Lu, Michael Chau, Peng Gao, JP whose phone numbers had been provided to the Tribunal as the Tribunal has accepted their evidence. The Tribunal hearing was conducted with the assistance of an interpreter in the Mandarin and English languages.

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

   CONSIDERATION OF CLAIMS AND EVIDENCE

5. In order to meet the criteria for the grant of a Business Skills (Residence) (Class DF) Subclass 890 visa the applicant nominated as her main business, at the time of application, THS Australia Pty Ltd, trading as Fujia Chinese Restaurant, of which the applicant was the Sole Director.

6. The applicant does not claim to have an interest in any other business.

7. The applicant confirmed that she nominated 30 September 2016 for purposes of assessing her net business assets for cls. 890.212(a) and 890.212(b).

8. The applicant provided business financials for THS Australia Pty Ltd as at 30 September 2015 and 30 September 2016 and included evidence of her loan to the business as at 30 September 2015 and 30 September 2016.

9. The applicant claimed that she had equity in the business and she had made a loan to the business.

10. In support of her claimed loan to the business, the applicant provided the following:

    ·a general loan ledger from 02 September 2013 to 31 December 2016, which covers the relevant period

    ·personal bank statements

    ·business bank statements

    ·letter from Michael Chau of Michael Chau & Associates (Accountants) referencing the loan and stating that the loan to the company comprised of funds transferred from the applicant’s personal bank account

    ·a written statement from the applicant’s migration agent which included an explanation of the loan to the business confirming that only two of the applicant’s contributions to the business were supported by the applicant’s bank statements.

    ·a handwritten receipt dated 31 August 2015 for payment of $AUD35 000 claiming to be for refurbishment of the business premises ie cool room

11. The business assets claimed were:

30/09/2015	30/09/2016
Equity in the business	($A 18 571)	$A 8 123
The applicant’s loan to business	$A 123 293	$A 93 375
Total net value of the business	$A 104 722	$A 101 498

1. The applicant claimed that she made credits to the business account but the delegate found that only 3 credits were shown in the Bank Statements. The applicant also claimed that on 31 August 2015 a payment of $35 000 was made for refurbishment of the business premises (claimed to be for the purchase and installation of a new cool room for the business). This amount was listed in the loan ledger as a loan to the business from the applicant.

2. The delegate found that the only evidence of the transaction for cool room refurbishment was a handwritten receipt dated 31 August 2015 for payment of $35 000. The receipt did not include information, including the name or details of the supplier or evidence to show that the $35 000 payment was made from the applicant’s personal bank account, or that of her spouse. The applicant failed to provide any explanation as to where this amount originated from or how the payment was made.

3. The applicant provided the following information to the Tribunal: 

   ·     Statutory Declaration of Jiangxiong Cui Chef attesting to the applicant replacing the cool room of the restaurant at 159 Broadway Road, Ultimo NSW 2007 in or around August 2015.

   ·     Written statement by Peng Gao

   ·     Statutory Declaration of Jin Han Lu Tradesman attesting to in or around July or August 2015, replacing the cool room and being paid $35 000 in cash and signing a receipt for that amount of money.

   ·     Statement of Peng Gao Company Director, who stated that he has known the applicant and her husband, since 2009. The deponent stated that the applicant needed to transfer funds from China for her business investment and for living expenses. Due to Chinese government restrictions on foreign currency exchange and transfer, some of the funds transferred from China were by way of cash carried by travellers from China. Since late 2013 he has been requested by the second named applicant to bring cash to the applicant in Sydney on many occasions when he travelled from China to Australia. Each time he would carry between $A2 000 and $A9 000 in cash and would personally hand the cash over to the applicant after he arrived in Sydney. Between January 2015 and August 2015, he made six trips from China to Australia, arriving on 13/01/2015, 11/02/2015, 31/03/2015, 29/04/2015, 06/06/2015 and 02/08/2015. During this period, he carried cash of $A8 000 to $A9 000 on each trip and he personally handed the cash to the applicant after arriving in Sydney.

   ·     Photos of a cool room.

   ·     Statutory Declaration of applicant stating that

   Until EFTPOS was installed in the shop in March 2019, customers paid in cash and the Business paid its suppliers of goods, tradespeople for equipment and services, employee’s wages, rentals, and utilities by cash.

   I then deposited part of the business takings into the company bank account and kept the rest in the safe at my home. Some of the takings were also utilised to repay my director’s loan to THS, as reflected in the company’s financial statements prepared by a professional accountant.

   At all times THS has accurately reported its sales income and business expenses in the Business Activities Statements and the annual financial reports.

   When THS purchased the Business in 2014, there was an old cool room on the premises, where stocks including meats, vegetables and drinks were kept. Coming to early 2015, I noticed that the old cool room did not work in good condition and it constantly failed to maintain the low temperature required. The restaurant chef at the time, Jiangxiong Cui, also reported the problem to me. Eventually it became necessary to replace the old cool room. I decided this should be done before the weather turned warm in spring.

   I made inquiries for quotes on a new cool room, including from the advertisements on the local Chinese newspaper, Singtao Daily. I contacted a tradesperson that offered the competitive quote and turnaround time in July 2015 and they sent Jin Han Lu to our restaurant. At beginning, I paid a deposit of $18,000 in cash to Mr Lu so they could order the equipment and parts. I recall carrying the cash from my home and handed over the cash to him myself.

   When the new cool room was completed on 31 August 2015, I paid the balance of $17,000 in cash to Mr Lu. I carried the cash from my home and handed over the cash to him that day. He then gave me a receipt for the full amount of $35,000 signed by him. The receipt was the evidence of warranty should we request him to return for any warranty. For my reference, I wrote his mobile phone number, 0426 289 306, on the receipt.

   In the past six years, my child, Xuejun Li, and I have been residing in Sydney, while my husband, Wensheng Li, has ordinarily resided in Beijing, China for business commitment. My husband sent money from China to support my business and living here in Sydney. Some of the funds were brought in cash by friends who travelled from Beijing to Sydney.

   Between January and early August 2015, Peng Gao, who is a JP and a family friend for many years, made six trips from Beijing to Sydney. I recall Gao helped bring $40,000 to $50,000 in cash from my husband during that time. I used the majority of this cash towards replacing the cool room.

4. At the Tribunal hearing the applicant was asked about how she acquired the business. She said that in May 2014, she paid $50 000 for the turnover. It included 1 month rent and all equipment of the restaurant. Asked if the equipment purchased was included in a lease or Contract of Sale, she said there were other minor items not included in the Contact of Sale, dishes and bowls that did not meet the requirements of the business.

5. In regard to the only providing page 1 of Contract of Sale of Business, the applicant said that the Contract was with the real estate agent. The previous owner got her to sign 5 + 5 lease. The Contract of purchase of the business maybe at her home or with the accountant.

6. The applicant was asked about her business background. She said it is in hospitality. Asked if she had a business previously she said that she and her husband have a Chinese restaurant, since 1998. It still exists and her husband runs it in Beijing.

7. Asked if she made enquiries from anyone in Australia about her legislative requirements to run a business, she said that she made no enquiries from anyone about running a business prior to opening her business. Asked if she made any enquiries about her obligations and she said that she had no knowledge what to do. She said her accountant registered a company, she went to Chinatown and asked people there and tried to understand some issues about running a restaurant. Asked what sort of records she kept when she first started to run a restaurant, she said she did not keep records. Asked who prepared the BAS forms for the Department, she said her accountant. She provided all the invoices including cash payment and bank transfer. She keeps no books herself. She keeps no records by cash or by card. On average her takings are $1000-1200 per day. The business is open from 11.00am to 9.00pm 6 days per week. She works herself in the restaurant and is there all the time. She does not employ anyone else on the register.

8. The Tribunal asked the applicant how she deposited takings from the business and she confirmed that she went to the ATM – Westpac Zetland. Asked if she always deposits her cash takings there, she said she did.

9. Asked if the only transfer deposits in Westpac accounts by her personally between 30/9/15 and 30/6/16 was $20 000 in April, 29.4.16 and $20 000 in February. She said that the company to now still owes her $74 000.

10. It was put that the business bank statements do not reflect turnover and asked if she had other accounts, she said that she did not. Her supplier delivers goods twice a week. Asked if she had a cheque account, she says she does but her suppliers want cash. She said that it is not unusual as she is a traditional person, she likes to keep some money at home. It was put that this could indicate she is avoiding tax. 

11. Asked how she pays rent for her business premises, she said it was by cash or personal bank transfer and later she authorised her accountant to transfer from the bank account of the company. Put there did not appear to be any rent payments coming out of the business accounts provided to the Tribunal. She said that she paid them from her personal bank account. Asked why she did that, she responded that it was because she did not quite understand the difference between company bank accounts and personal bank accounts. It was put to the applicant that she did so in order to avoid tax.

12. Asked where the financial returns, tax assessments and tax returns were for 2015-16, 2016-17, the applicant said that she lodged returns.

13. In regard to the cool room, she said that Mr Lu had a business, she does not remember the name. She said that Mr Lu replaced the compressor and fan, sensor and conductor and some tubes. The previous cooler was not working only the wires worked. Mr Lu is not a friend. Asked how she located him, she said that after completion of work she had other work for him. Asked if Mr Lu is still working for her, she said that if she has something for him she will get in touch with him. She pays him via cash.

14. Asked if she was aware that cash payments would not be evidence for the tax department for an audit. She responded that all the cash she has paid has been reported to the accountant.

15. In relation to the bank accounts asked why the money she received was not deposited into her bank account as evidence for tax and accounting purposes, she said she did not have an eftpos machine.

16. The Tribunal put that to the applicant its concerns about where the monies have come from. Directors loan must be clearly traceable and the Tribunal is unable to trace the moneys paid for the cool room.  Asked about Mr Lu’s business, the applicant was unable to recall. He still does work for her. Asked how she pays him she says she pays cash. She said that all cash that has been paid she has reported to her accountant. The Tribunal said that cash relies on the honesty of the person. If she wanted to keep proper accounting records asked why she still continues not to deposit all her cash.

17. Put to the applicant that China has had for a long time $50,000 USD Limit Per Person Per Year for Sending Money Abroad[1] and that she would have been able to receive money from her husband via the banking system in 2015. She responded that in 2015 he came over and was here. She said she needed the money. She said he had enough funds and brought the money slowly. He brought the money over as they did not want the Chinese authorities to know as her husband is a traditional person and her son is studying here so whenever her expense were not enough he would request Peng Gao to bring the money. Asked how much she had in her bank account at the time that Mr Gao was carrying the money for her, she said she cannot remember but it should be no lower than $100 000. It was put that she did not need the money then, she said she needs to pay back the loan.

    [1]

18. Asked why her husband did not want the Chinese authorities to know her husband was brining money out of China she said her husband is a traditional person and her son is studying here and whenever her living expense not enough he would request Mr Pen Gao to bring the money for her.  Asked how much money she had in her personal bank account during 2015-6 when Mr Peng Gao was carrying the money she said that it should not be lower than $100 000. Put that she had the money in a bank account in Australia but said she had money, she said she needed to pay back the loan because she bought property.

19. It was put that when looking at the money going into the business and the net assets are more than $100 000 `she has not shown that the money is traceable and lawfully acquired. She said the money was prepared prior to her registration of business.

20. The applicant’s accountant, Mr Chau, told the Tribunal that he has been the applicant’s accountant since 2013. Asked how he prepares her returns, he said that she records turnover in her books and records how much cash they receive and expenses and gives him once a month and he then prepares the figures. He does the bookkeeping. Asked how he balances off the cash with the ATM deposits, he said there is a report on daily income. It was put that the bank statements do not balance with the documents provided eg. Rental was not shown as being paid. It is all recorded on the expenses. Asked why all money is not deposited into the bank account and then the outgoings are paid from that account. He said it is a cash basis business and the money has been paid either from her business or the personal account. He picks up whatever is on bank statements and the rest is on Directors Loan account. He has seen the cool room and he has seen the cash receipt of a 3^rd party.

21. Mr Poynder of Counsel, attending as a friend, asked the accountant some questions. The accountant said that it is legal to operate a cash business in the manner the applicant operates. He said you can establish a cash business or an accrual business. For the restaurant business 99% is cash basis and all restaurants, especially small ones, operate in this manner, it is usual. Asked if he has seen anything that would raise a concern that the applicant was avoiding tax, he said that he did not look at it. His company just does the bookkeeping.  The director has a decision to tell the truth. They do not check the stock. Asked if he has ever doubted the applicant’s honesty, he responded ‘why should I’. It was suggested by the Tribunal that failure to deposit all takings into an atm [bank] is to deliberately avoid tax. He said that he did not agree, the money is all owners’ equity, it belongs to the applicant.  Whatever he sees in the account it is in petty cash and kept on hand. There is no accounting principle a business owner should put all money through the bank accounts, but it makes it easier. Nothing illegal. Since the time of the eftpos machine then it has been easier for him and since then you can see from the bank statement there is lots of improvement. Asked about the situation in China the accountant said that there is deemed income in China. Lots of Chinese bring certain amounts of cash into Australia, it is less than $10 000 and legal in Australia and in China you can bring $US10 000.

22. The applicant’s former chef advised the Tribunal that he worked for the applicant when the cool room was built.

23. Mr Poynder asked the Tribunal to whether it wanted to speak to the tradesman to be telephoned as he had other things to be done. It was noted by the Tribunal that his name would be published in the decision and he has accepted payment of cash. The Tribunal advised Mr Poynder that it had made it clear in correspondence it sought Mr Lu’ s presence to personally give evidence. Mr Poynder said that he relied on the information made in the statutory declaration by Mr Lu.

24. Mr Poynder said he is not sure what the issue is before the Tribunal other than the delegate’s issue of the $35 000. The Tribunal noted that it had not seen the financial statements. Mr Poynder indicated that he expected a s.359A or s.359 letter if the Tribunal had further concerns. The Tribunal stated that if it had further concerns after seeing the financials it would make it clear.

25. Financial statements were provided to the Tribunal after the Tribunal hearing.

    REASONS AND FINDINGS

26. In order to meet the criteria for the grant of a Business Skills (Residence) (Class DF) Subclass 890 visa the applicant is required to show the assets of the applicant and spouse in the main business or businesses in Australia have a net value of at least $100,000 throughout the period of 12 months ending immediately before the application was made.

1. The Tribunal finds that the application was lodged on 20 December 2016. The business the applicant claimed was her main business, at the time of application, was THS Australia Pty Ltd, trading as Fujia Chinese Restaurant.

2. Clause 890.212 states:

   The assets of the applicant, the applicant’s spouse or de facto partner, or the applicant and his or her spouse or de facto partner together, in the main business or main businesses in Australia:

   (a)             have a net value of at least AUD 100 000; and

   (b)             had a net value of at least AUD 100 000 throughout the period of 12 months ending immediately before the application is made; and

   (c)             have been lawfully acquired by the applicant, the applicant’s spouse or de facto partner, or the applicant and his or her spouse or de facto partner together.

3. For the purpose of cls.890.212(a) and 890.212(b), the applicant claimed that the net business assets were at least $A100 000 at the beginning and end of the nominated 12 month period and provided business financials as at 30 September 2016. The Tribunal finds that the nominated date is within 3 months of the date of application. Therefore the Tribunal has assessed the applicant’s business assets as at 30 September 2015 to 30 September 2016.

4. PAM3 states:

   the balance of any loans advanced to the business by the applicant (if the directors or major shareholders have made any loans to the company, these should be itemised in the financial statements or in the notes to the accounts) and

   It is common for companies or other incorporated businesses to initially be financed by loans from the owner/s, a business loan from a financial institution and sometimes by loans from independent investors. These loans are liabilities to the business, which are later repaid. Loans made to businesses from the applicant’s personal asset base (for example, from funds transferred from overseas) are fully attributable to the net value of the assets of an applicant in a business.

   The value of personal loans made to a business by the applicant which are based on an applicant’s (and/or their spouse or de facto partner’s) personal assets as collateral should be added to the net value of an applicant’s business assets. However, the value of personal loans made to the business by the applicant which are not based on personal assets as collateral or that exceed the value of the secured assets used as collateral should be deducted from the net value of the applicant’s business assets. Unsecured loans cannot be counted as a personal asset.

5. In relation to the calculation of the net business assets, or equity for a privately incorporated business, PAM3 sets out a formula in relation to calculation of net business assets. Such a formula is absent from the Regulations. Policy allows loans by directors and shareholders to be taken into consideration, recognising that it is common for businesses to initially be financed by loans from the owner/s that represent liabilities to the business that are later repaid.

6. The Tribunal notes that whilst PAM3 policy may provide guidance, it is not bound to follow it. In particular, the Courts have held that the PAM3 guidelines constitute no more than an administrative advisory guide to decision makers in relation to the application of the Act and Regulations, and they are incapable of being elevated. Nevertheless, the Tribunal considers the approach set out in the policy guidelines to be a reasonable starting point.

7. Post hearing the applicant submitted Financial Statements for the years 2014-5 and 2015-6. In the 2014-5 financial year, the Tribunal compared the declared income with the income deposited to the applicant’s bank account. In the 2015-6 Financial Year the applicant deposited into the Company account at Westpac around $57 764.15.  Declared revenue of the business to the ATO was $207 717. Therefore $149 952 was declared as being earned by the business without any corresponding bank deposits. There were no identified transfers from the applicant’s bank account.  In the 2015-6 tax year, $349 542 was claimed to be income in the annual tax return. But the income deposited into the applicant’s business bank account again did not reflect this. Therefore the Tribunal is not satisfied that the applicant has fully disclosed the financial position of the business. 

8. A statutory declaration was provided by Jin Han Lu Tradesman of Oatley attesting to, in or around, July or August 2015, replacing the cool room, being paid $35 000 in cash for the work and signing a receipt. The applicant’s evidence in regard to this tradesman was unsatisfactory as the applicant was not able to provide any detail about the tradesman.

9. The Tribunal notified the applicant prior to the hearing that if the applicant sought to rely on the evidence of any deponent who had lodged a statutory declaration then the Tribunal required that person to attend the hearing and bring with them a copy of their passport. Jin Han Lu did not attend the hearing. Mr Poynder requested that the Tribunal take evidence from Jin Han Lu by telephone. The Tribunal did not agree to take evidence from a person via a mobile phone because the Tribunal had put the applicant on notice prior to the hearing that it required the deponent to appear before the Tribunal in person and to also provide a copy of their passport. A passport is a form of identification and the Tribunal does not accept that it should take evidence from a witness if not satisfied of the identity of the witness. As Mr Lu did not attend the hearing, the Tribunal places no weight on the statutory declaration of Mr Lu.

10. Mr Lu provided a ‘receipt’ for the cool room and that receipt had no address, ABN, ACN or any other information for the Tribunal to be satisfied as to the identity of the tradesman. There was no address, written in English, for the Tribunal to be satisfied it related to the applicant’s business premises. As the receipt had no information on the face of the document, other than a mobile phone number and the amount of $35 000, the Tribunal places no weight on this document as evidence that the amount of $35 000 has been paid for work completed on a cool room at the applicant’s business premises.

11. The Tribunal accepts that the applicant and her spouse are traditional persons and that they work in a cash environment and that dealing in cash is not illegal. Nevertheless, the Tribunal notes that cash is anonymous and untraceable. The Tribunal accepts that a cool-room was repaired/installed in the business premises, but has no evidence before it as to how much was spent on the cool room.  The Tribunal notes that at the time of the cool room repairs, the applicant had sufficient funds in her personal bank account to make the payments but did not do so.

12. Whilst Mr Gao attests to bringing cash from China for the applicant, the Tribunal is not satisfied that this cash brought into Australia by Mr Gao was utilised by the business as the Tribunal is not satisfied the applicant has fully disclosed the financial situation of the business to the Tribunal. 

13. The Tribunal has considered a deduction of  $35 000 for replacement of the cool room, by the applicant, in the copy tax return. As the Tribunal is not satisfied as to the cost of that renovation, nor who completed the renovation, the Tribunal places no weight on the copy taxation return regarding the cost of the cool room. 

14. As the Tribunal places no weight on the ‘receipt’ for $35 000 for the repairs to the cool room the Tribunal is unable to be satisfied that the applicant spent $35 000 on the cool room repairs, the Tribunal is unable to be satisfied that the applicant made Director’s loans to the business of $A123 293 as at 30 September 2015 and  $A93 375 as at 30 September 2016.  Therefore the Tribunal is unable to be satisfied that the assets of the applicant, the applicant’s spouse or de facto partner, or the applicant and his or her spouse or de facto partner together, in the main business or main businesses in Australia have a net value of at least AUD 100 000 and had a net value of at least AUD 100 000 throughout the period of 12 months ending immediately before the application is made.

15. The Tribunal is satisfied that the applicant does not meet cl.890.212(a) and cl.890.212(b). The applicant cannot meet cl.890.212.

16. The Tribunal must affirm the decision under review.

    DECISION

17. The Tribunal affirms the decision not to grant the applicants Business Skills (Residence) (C

    Lilly Mojsin

    
    

    Member