Kou (Migration)
[2024] AATA 2245
•19 June 2024
Kou (Migration) [2024] AATA 2245 (19 June 2024)
DECISION RECORD
DIVISION:Migration & Refugee Division
APPLICANTS: Mrs Danqing Kou
Mr Yang Pan
Mr Daniel Guan Nan Pan
Mr David Guan Quan PanCASE NUMBER: 2118774
HOME AFFAIRS REFERENCE(S): BCC2018/4649365
MEMBER:Peter Ranson
DATE:19 June 2024
PLACE OF DECISION: Brisbane
DECISION:The Tribunal affirms the decisions not to grant the visa applicants Business Innovation and Investment (Permanent) (Class EC) visas.
Statement made on 19 June 2024 at 12:41pm
CATCHWORDS
MIGRATION – Business Skills (Permanent) visa – Subclass 888 – purchase of the business and the associated loan from the applicants to do that was not adequately explained and evidenced – value of the business – reasons for the decline in the value of the business have been adequately explained – applicants have met the requirements tested by the Tribunal other than net business assets at the time of this decision – Ministerial intervention – decision under review affirmed
LEGISLATION
Migration Act 1958, ss 65, 351
Migration Regulations 1994, rr 1.11, 1.03, Schedule 2, cl 888.222, 888.223, 888.224, 888.225
STATEMENT OF DECISION AND REASONS
BACKGROUND
Ms Kou and her family are from China having previously lived in New Zealand. They established a business in China in 1993 and moved to New Zealand in 2001. They arrived in Australia in 2013 and purchased a takeaway business in suburban Melbourne. The business closed and relocated to another location under a new name, and they continue under that name now.
Ms Kou applied for a Business Skills (Permanent) Business Innovation and Investment (Permanent) (Class EC) visa on 23 October 2018. The secondary applicants applied based on being members of her family unit.
The primary criteria for the grant of a Subclass 888 visa include criteria set out in streams. Ms Kou applied for a visa in the Business Innovation stream. The criteria in Subdivisions 888.21 and 888.22 are the primary criteria for the grant of the visa in the Business Innovation stream. All criteria must be satisfied at the time a decision is made on the application.
On 6 December 2021, a delegate of the Minister for Home Affairs refused to grant Ms Kou a Business Skills (Permanent) Subclass 888 visa under s 65 of the Migration Act 1958 (Cth). The delegate found the secondary applicants could not be granted Subclass 888 visas, as they did not meet the primary criteria, nor did they meet the secondary visa criterion (cl.888.311) requiring them to be members of the family unit of a person who met the primary visa criteria, and they made a combined application with Ms Kou. Ms Kou then applied for a review of that decision.
The delegate refused to grant the visa on the basis the purchase of the business and the associated loan from the applicants to do that was not adequately explained and evidenced.
The issues in the present case are:
(a) Do the applicants have an actively operating main business at the relevant times,
(b) Was the purchase of the business adequately evidenced, and
(c) Do the applicants have net business assets and net business and personal assets at the required level at the relevant times.
For the following reasons, the Tribunal has concluded that the decision under review should be affirmed.
CONSIDERATION OF CLAIMS AND EVIDENCE
A note about policy
The Tribunal is charged with determining the correct or preferable decision based on an independent assessment of the facts before it and is entitled to treat policy as a relevant factor in that determination. The Full Federal Court has found that where a policy exists to guide the decision maker in exercising its powers, the Tribunal may apply that policy in reviewing a decision where it "makes it clear that it has considered the propriety of the particular policy and expressly indicates the considerations which have led it to that conclusion”.[1]
[1] Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409, from 420.
To the extent the Tribunal has considered policy in this case, it has not applied it inflexibly and has only considered it to the extent the policy is consistent with the requirements as set out in the legislation.
Procedural matters
The President of the AAT has issued Directions on Conducting Migration and Refugee reviews. Copies of these were provided to Ms Kou by e-mail on 22 February 2024. Generally, the Tribunal will only look at the criterion the delegate was not satisfied was met. However, if it appears another criterion may not be satisfied, the Tribunal has an obligation to consider that other criterion, because there is no point remitting a decision on one criterion and sending it back to the Department of Home Affairs only for it to fail on another criterion if that was obvious to the Tribunal while conducting its review.
In this decision, the Tribunal is considering cl.888.225, being the criterion on which the delegate refused your application, which relies on the applicant having an ownership interest in at least one actively operating main business in Australia. To do that, the Tribunal will first consider cl.888.222, then cl.888.223 and cl.888.224, before turning its attention to cl.888.225.
Ownership interest in main business – cl.888.222
Ms Kou and her family lived in New Zealand and moved to Australia in June 2013. Mr Pan had arrived earlier that year to work in a takeaway food business, such as a fish and chip shop, so he could become familiar with such businesses ahead of buying one.
In October 2013, Ms Kou purchased a takeaway business called ‘Clarinda Fish and Chippery’ in suburban Melbourne. She operated the business in partnership with Mr Pan and they leased the premises from which the business operated. The business now operates as ‘Angelo’s Fish & Chips’ at Wantirna also in suburban Melbourne.
Clause 888.222 requires the applicant had an ownership interest in at least one actively operating main business in Australia during the two years immediately before the application was made,[2] and continues to have the interest in the actively operating main business.[3] No more than two businesses can be nominated for this purpose,[4] and one or both businesses relied on to meet these criteria.[5]
[2] Clause 888.222(1)(a).
[3] Clause 888.222(1)(b).
[4] r.1.11(2).
[5] Yang v Minister for Immigration and Border Protection [2014] FCCA 1576.
The business relied on by Ms Kou to satisfy the visa requirements is a takeaway food business conducted by a partnership of her and Mr Pan. The name of the business as shown on the visa application was ‘Clarinda Fish & Chippery’ operated from premises in suburban Melbourne. As mentioned above, that business is now called Angelo’s Fish & Chips, which operates from different premises also in suburban Melbourne.
Case law has established a business is not a legal entity but rather an enterprise or undertaking.[6] One business can be owned by multiple entities and conversely, multiple businesses can be owned by one entity. For the avoidance of doubt, an ABN attaches to an entity (such as a company, trust, partnership or sole trader), not to a business enterprise.
[6] Ibrahim v MIAC [2009] FCA 1328 at [30].
Accordingly, the Tribunal must consider the nature of her interest in this business, whether it was actively operating and whether it met the definition of ‘main business’ in the period commencing two years before the application was made and continues to be a main business.
Does the applicant have an ownership interest in each business relied on at all relevant times?
An ‘ownership interest’, in relation to a business, means an interest in the business as:
a.a shareholder in a company that carries on the business, or
b.a partner in a partnership that carries on the business, or
c.the sole proprietor of the business.
Ownership interest includes an interest held indirectly through one or more interposed companies, partnerships or trusts.[7] Ownership for this purpose includes beneficial ownership if it is evidenced in accordance with the terms of r.1.11A of the Regulations, set out in the attachment to this decision.[8]
[7] r.1.03 of the Regulations and s.134(10) of the Act.
[8] r.1.11A(1)
To meet cl.888.222(1) the Tribunal must be satisfied Ms Kou had an interest of this kind in the takeaway business during the two years immediately before the application was made and she continues to have the ownership interest.
The business is conducted by a partnership of Ms Kou and Mr Pan. This is confirmed by an Australian Business Number (ABN) search, which is discussed later, and in a submission from the accountant for the business. A partnership agreement was not provided and may not exist, which is common for small family partnerships and means each partner has an equal interest in the net assets of the business. That means Ms Kou and Mr Pan each has a 50% interest in the nominated business.
On 10 September 2013, Ms Kou signed a contract to purchase a takeaway business called Clarinda Fish and Chippery. The purchase price was $200,000 and a deposit of $20,000 was to be paid, both exclusive of GST. The purchase price was silent as to the apportionment as between goodwill and plant and equipment. Settlement was due on 30 October 2013. Clause 20 of the General Conditions of the contract specify the business was sold on a going concern basis.
The business premises listed on the contract were at Shop 9, Clarinda Shopping Centre, 67 Bourke Road, Clarinda Victoria 3169. The lease of those premises was transferred to Ms Kou in 2013,[9] and renewed in the name of Ms Kou and Mr Pan on 26 October 2017.
[9] The copy of the lease transfer document included in the department file does not record the actual transfer date as the filed on the document has been left blank.
Financial statements for the year ended 31 July 2018 were provided. They show on the balance sheet an intangible asset of $200,000, which the accompanying notes identify as ‘Goodwill and consolidation’. Financial statements for subsequent years through to 30 June 2023 continue to show an asset of $200,000 by that name.
Accordingly, the Tribunal is satisfied Ms Kou did have and does have an ownership interest in the takeaway business during the two years immediately before the application was made and she continues to have the ownership interest.
Was each business relied on actively operating at all relevant times?
To meet cl.888.222(1) the Tribunal must be satisfied the relevant business was actively operating during the two years immediately before the application was made and continues to be so.
The term ‘actively operating’ is not defined in the Act or Regulations. In considering whether this requirement is met, the Tribunal may consider whether the business exhibited activity of a ‘repetitive, continuous and permanent character’ at the relevant times, in which the business actively sought to generate business, in fact generated trade and custom and derived some financial gain for its activities in the relevant period.[10]
[10] Shahpari v Minister for Border Protection [2016] FCCA 513 at [71]
The financial statements provide relevant information about actively operating. They reveal the following turnover:
Year ended Turnover ($) Profit/(Loss) 31 July 2017 247,344 41,358 31 July 2018 308,324 58,517 30 June 2019 198,111 25,687 30 June 2020 195,671 32,817 30 June 2021 128,091 4,943 30 June 2022 144,782 190 30 June 2023 129,541 2,777
Clarinda Fish & Chippery and now Angelo’s Fish & Chips is a takeaway food business, which operates from retail premises in suburban shopping centres. The annual turnover listed above show the business actively sought to generate business, because it generated trade and custom and derived some financial gain for its activities during the years shown.
Accordingly, the Tribunal is satisfied the takeaway business was and is actively operating during the two years immediately before the application was made and continues to be so.
Does each business relied on satisfy the ‘main business’ definition at all relevant points in time?
To satisfy the requirements of cl.888.222(1), the business relied on by Ms Kou must meet the ‘main business’ definition during the two years immediately before the application was made and continues to be so. The term ‘main business’ is defined in r.1.11 of the Regulations and is set out in full in the attachment to this decision. There are four elements to the definition, each of which must be satisfied for a business to be a main business.
Firstly, the applicant must have or have had an ownership interest in the business. ‘Ownership interest’ is defined in s.134(10) of the Act.[11] If a beneficial interest is relied on for these purposes, certain evidentiary requirements must also be met.[12]
[11] r.1.03
[12] r.1.11A
Secondly, the applicant must maintain or have maintained direct and continuous involvement in management of the business from day to day and in making decisions affecting the overall direction and performance of the business.
Thirdly, the value of the applicant’s ownership interest, or the total value of the ownership interests of the applicant and the applicant’s spouse or de facto partner, in the business must meet certain thresholds:
a.if the business is operated by a publicly listed company, the value of the ownership interest must be at least 10% of the total value of the business.
b.if the business is not operated by a publicly listed company and the annual turnover of the business is at least A$400,000, the value of the ownership interest must be at least 30% of the total value of the business.
c.If the business is not operated by a publicly listed company and the annual turnover of the business is less than A$400,000; the value of the ownership interest must be at least 51% of the total value of the business.
Finally, the business must be a qualifying business. ‘Qualifying business’ is defined as an enterprise operated for the purpose of making profit through the provision of goods, services or goods and services (other than the provision of rental property) to the public and is not operated primarily or substantially for the purpose of speculative or passive investment.[13]
[13] r.1.03
As discussed above, the takeaway business is owned and operated by a partnership of Ms Kou and Mr Pan, and it has been so since 2013 when they bought what was then call Clarinda Fish & Chippery. Accordingly, the Tribunal finds the first and third elements of the main business definition are met.
The financial statements for the partnership from 2017 to 2023 show no wages expense or other employee costs. That means the business is operated by Ms Kou and Mr Pan alone. Self-evidently, Ms Kou has maintained direct and continuous involvement in management of the business from day to day and in making decisions affecting the overall direction and performance of the business throughout the two years immediately before the application was made and she continues to be so, in conjunction with Mr Pan, because she and he are the only people involved in the business so all decisions must fall to them. The Tribunal finds the second element of the main business definition is met.
Again, self-evidently the takeaway business sells goods to the public, that is, hot and cold prepared food and associated products, such as, beverages and confectionary. As shown above, the business has generated a profit every year under review albeit turnover and profits were severely impacted by the extensive lockdowns in Melbourne during the COVID-19 pandemic. The business has always operated from commercial premises in suburban shopping centres therefore its sales are made to the public. The balance sheet at 31 July 2018 and still at 30 June 2023 includes no assets of an investment or speculative nature other than the goodwill purchased in 2013. For these reasons, the Tribunal finds the takeaway business is a qualifying business.
Accordingly, the Tribunal is satisfied the takeaway business does meet the definition of main business at all relevant points in time and with that, the Tribunal is satisfied cl.892.211(1) is met. There is no evidence before the Tribunal to indicate the business was purchased from another person who was an applicant for, or held, a Business Skills (Permanent) (Class EC) visa or a Business Skills (Residence) (Class DF) visa at the time of the acquisition, so cl.888.225(2) has no application in this decision.
The Tribunal has also considered cl.888.223 and cl.888.224 before considering cl.888.225.
Australian Business Number
Clause 888.223 requires an ABN has been obtained for each business mentioned in subclause 888.222(1).
On 2 April 2024, the Tribunal conducted a search of the Australian Business Register (ABR) on ABN 88 125 486 516 and confirmed the entity is D Kou & Y Pan, which is a family partnership of the applicant and her husband. The ABN and Goods & Service Tax (GST) registration has been current since 1 December 2013. That search also revealed the business name ‘Clarinda Fish & Chippery’ was held from 11 January 2014 to 24 December 2022 and another business name of ‘Angelo’s Fish & Chips’ has been held from 25 May 2022 and remains current.
Accordingly, the Tribunal finds Ms Kou satisfies cl.888.223.
Business Activity Statements
Clause 888.224 requires each BAS required by the Commissioner of Taxation during the two years immediately before the application was made has been submitted to the Commissioner and has been included in the application.
The Regulations do not provide a definition of the words ‘included in the application’ as used in cl.888.224. Departmental policy about BAS is limited to:
‘For 888.224, certified copies of original BAS or printed copies of the online version from the ATO portal that cover at least 2 years before the application is made must be provided to the department before a visa can be granted.’
In Nasirzadeh & Ors v Minister for Immigration & Anor [2019] FCCA 1115 at [45] Judge Driver said in relation to cl.892.211(2) which is similarly worded to cl.888.224:
‘… clause 892.221(2) imposes a “time of application” criterion requiring, among other things, that BAS “have been included in the application”. This, too, imports an “objective temporal test”.
The Tribunal must be satisfied at the time of its decision whether the BAS were included in the application. Regardless of what headings may or may not appear in the regulations, Nasirzadeh effectively imposes a time of application requirement on criterion which include the words ‘included in the application’ such as cl.888.224. The objective temporal test referred to in Nasirzadeh means there must be a close connection in time between the action required by the criterion and the time of application.
The textual aspects of cl.888.224 point strongly to the conclusion an application will be unsuccessful if it failed to contain evidence:
(a) each BAS required by the Commissioner during the 2 years immediately before the application was made had been submitted to the Commissioner, and
(b) copies of those BAS had been included in the application.
The requirements in cl.888.224 for an application for a Subclass 888 visa are expressed in imperative or obligatory terms. The regulation specifies the BAS had been lodged with the Commissioner and included in the application. The use of the imperative ‘has been’ naturally indicates the requirements to which they relate are necessary constituent elements of a Subclass 888 visa application. In the ordinary course, the natural meaning of the words ‘has been’ means the matter to which they relate are obligatory. So much was recognised in cognate circumstances in Fernando v Minister for Immigration and Multicultural Affairs (2000) 97 FCR 407, 419 [50] where Finkelstein J said:
‘Then there is the language of s 412 itself. An application for review “must” be given to the Tribunal within the prescribed period. If one adopts, as it is sometimes necessary to do, the maxim that Parliament says what it means and means what it says, the language adopted by the legislature strongly suggests that an application given to the Tribunal after the relevant period has elapsed is invalid.’
Clause 888.224 is not expressed in indeterminate language rather it imposes a requirement which can be easily identified and applied. Applying this to cl.888.224, where BAS are not included in the application [for a Subclass 888 visa], and are first provided at some later time, the regulation is not satisfied, and the application cannot succeed.
That is not to say an application which did not contain copies of the required BAS as lodged could be perfected provided there is a close connection in time between the action required by the criterion and the time of application. The courts have identified a period of more than five months as outside the scope of a close temporal connection for this purpose.[14]
[14] Niasar v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2021] FedCFamC2G 213 at [31].
Ms Kou’s visa application was lodged on 23 October 2018. The Tribunal is aware BAS are due to be lodged with the ATO by the 28th day of the month following the end of a quarter or the 28th day of the second month following the end of the quarter if lodged through a registered income tax agent or BAS agent. The BAS included in the department file are quarterly and lodged by a tax agent, so potentially the later lodgment deadline applies to Ms Kou.
Accordingly, the Tribunal finds the BAS for the two years immediately before the visa application was made were for the December 2016 to September 2018 quarters, that is, 1 October 2016 to 30 September 2018.
On 13 December 2019 the delegate wrote to Ms Kou requesting copies of Business Activity Statements and said:
‘You are required to provide copies of all BAS lodged during the 2 years preceding application. BAS for your main business, CLARINDA FISH AND CHIPPERY for the following periods have not been received: ● October 2016 to December 2018’
The Tribunal notes the comment in the delegate’s request for information which says: ‘BAS for your main business, CLARINDA FISH AND CHIPPERY for the following periods have not been received’. Ms Kou lodged her application on 23 October 2018 and the delegate’s request was made on 13 December 2019, which is more than 12 months later.
The Tribunal has located copies of the BAS for the quarters from December 2016 to September 2018 and notes the delegate’s request for a copy of the annual GST return for the year ended 30 June 2017, which Ms Kou provided. They reveal the following:
Quarter ended Date lodged Payable/refund December 2016 30 January 2017 2,744 March 2017 14 May 2017 2,744 June 2017 18 July 2017 3,896 September 2017 27 November 2017 4,052 December 2017 21 March 2018 4,894 March 2018 2 June 2018 1,102 June 2018 15 October 2018 3,562 September 2018 19 December 2018 2,387
The BAS for the quarter ended 30 September 2018 was lodged after the visa application was lodged. The wording of cl.888.224 does not require the BAS to have been lodged before the visa application is lodged only that they have been submitted to the Commissioner, which the lodgement date confirms.
However, the Tribunal was unable to locate any evidence the requisite BAS were included in the application, that is, with the application when it was lodged or soon thereafter. Ms Kou was invited to provide a submission to the Tribunal setting out how she satisfies the requirements of cl.888.224 and provide relevant evidence of such compliance. Ms Kou was advised if the Tribunal is not satisfied the BAS were included in the application, that may be the reason or part of the reason why the decision under review may be affirmed.
In response Ms Kou said she contacted her immigration consultant and accountant who provided this response:
1. The business period prior to our lodging of the 888 visa application was 01/08/16 to 31/07/18. We have submitted all of the materials during this period as required by the application’s clauses, including the “financial statements for your business”. However, the BAS for the season of December 2018 was not included in them. The BAS requested by the immigration case officer in 2019 was directed at the time period going up to December of 2018, which was after our initial time of application and therefore the BAS of the season of December wasn’t a necessary material at our initial application. But after the request we did promptly supply all the material as required according to the request.
2. All of the application material submitted back then were hard-copies of documents mailed to the immigration office and all of the documents requested by Officer Catherine in 2019 were also sent via mail before the due date. Later on when Officer Catherine was asking us to provide other additional documents there was no further mentions of BAS so we thought that they have received all the materials they needed.’
The Tribunal disagrees with the comment above about the so-called ‘business period’ being 1 August 2016 to 31 July 2018. As discussed above, the relevant period is 1 October 2016 to 30 September 2018. The Tribunal agrees the December 2018 BAS is not required for satisfaction of cl.888.224.
The statements provided by Ms Kou are far from definitive as to whether the BAS were sent in with the application or soon afterwards as required by cl.888.224. For example, Ms Kou says: ‘We have submitted all of the materials during this period as required by the application’s clauses …’ without saying when. Later she says: ‘All of the application material submitted back then were hard-copies of documents mailed to the immigration office and all of the documents requested by Officer Catherine in 2019 were also sent via mail before the due date.’ The inclusion of the words ‘and’ and ‘also’ suggests the application material was sent at a different time to the documents requested by ‘Officer Catherine’ and each set of documents were hard copies. It is irrelevant how the copies of the BAS were sent. What matters is whether they were sent with the application or soon thereafter.
The Tribunal is satisfied the BAS were included in the application because of the response from Ms Kou as discussed above. Accordingly, the Tribunal finds cl.888.224 is met.
Business and personal assets, employees and turnover: cl.888.225
Clause 888.225 has several elements. If the nominating State or Territory government agency has not determined there are exceptional circumstances, the requirements in at least 2 of subclauses (2) to (4) and the requirement in subclause (5) are to be met. The requirements of subclauses (2) to (5) are set out below.
(2) The assets owned by 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 had a net value of at least $200,000 throughout the period of 12 months immediately before the application was made and continue to have a net value of at least $200,000 and were lawfully acquired.
(3) In the period of 12 months immediately before the application was made, the main business in Australia, or main businesses in Australia, of the applicant, the applicant’s spouse or de facto partner, or the applicant and his or her spouse or de facto partner together provided employment in Australia to 2 or more employees for a total number of hours that was at least the total number of hours that would have been worked by 2 full-time employees. Each employee whose employment is used to work out that total number of hours cannot be the applicant or a member of the family unit of the applicant during that period and must be either an Australian citizen, an Australian permanent resident or the holder of a valid New Zealand passport during that period.
(4) The business and personal assets in Australia of the applicant, the applicant’s spouse or de facto partner, or the applicant and his or her spouse or de facto partner together had a net value of at least $600,000 in the period of 12 months ending immediately before the application was made and continue to have a net value of at least $600,000 and were lawfully acquired.
(5) The main business in Australia, or main businesses in Australia, of the applicant, the applicant’s spouse or de facto partner, or the applicant and his or her spouse or de facto partner together, had an annual turnover of at least $300,000 in the 12 months immediately before the application was made.
As mentioned above, the takeaway business has no employees. That means Ms Kou must satisfy cl.888.225(2), (4) and (5).
Net business assets: cl.888.225(2)
The financial statements for the year ended 31 July 2018 show net assets at that date and the previous year end of $11,356 and $23,617 respectively. The balance sheet at each year ended includes goodwill of $200,000 and a loan to the partnership of a similar amount being the funds provided by the partners to buy the takeaway business in 2013. Departmental policy accepts financial statements no earlier than three months before the application is made, which the Tribunal accepts.
Policy about net business assets says:
As a general rule, to calculate the net value of an applicant’s assets in a business in any given year, it is necessary to:
·establish the net value of the assets of the business (or owners’/shareholders’ equity or funds) then
·calculate the share/portion of those assets attributable to the applicant based on ownership interest and personal investment in the business.
To determine the net value of the assets of an applicant, and/or the applicant’s spouse or de facto partner in a business:
·calculate the proportionate share of the assets held by the applicant and/or spouse or de facto partner, then:
add
·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
deduct
·the balance of any loans the business may have advanced to the applicant and
·the value of any other loans the applicant may have taken out to finance their investment in the business not based on personal assets pledged as collateral
The Tribunal has applied policy to the calculation of net business assets because it provides a fair and reasonable basis for such a calculation. The result is:
31 July 2018 31 July 2017 Net assets per balance sheet 11,356 23,617 % attributable to Ms Kou and Mr Pan 100% 100% Applicants combined share of net assets 11,356 23,617 Add: Loan by the partners to the business 200,000 200,000 Net business assets 211,356 223,617
The delegate was concerned because the funds paid by Ms Kou and Mr Pan from their personal bank accounts could not be traced into the bank account of the partnership entity to validate the purchase of the business and the creation of their loan account. That is not necessary because a partnership and its individual partners are one and the same. In this case the partnership is of individuals (as opposed to say a partnership of companies or trusts). The recording of those transactions in the books and records of the partnership is validly done by way of journal entry.
Ms Kou provided copies of ‘Customer’s Record of Bank Cheques’ she says were drawn from her bank account to the account of the vendor of the business. The details are:
Date Payee Amount ($) 26 November 2013 Macquarie Bank 15,252.70 2 December 2013 Jiafa Shi 176,103.59 Total $191,356.29
These amounts can be seen as withdrawals on copies of statements for CBA account ending 5621 in the name of Ms Kou provided as part of her pre-hearing submissions. That submission included a copy of a statement for Westpac account ending 6558 in the name of Mr Pan showing an amount of $20,000 withdrawn on 12 September 2013 and described as ‘WITHDRAWAL 0000356 DONCASTER, WESTFIELD SHP TWN VIC’.
The above amounts were referred to by the delegate and confirmed by Mr Nick Feng, Accountant of Kevinzhao The Company, in a letter dated 13 May 2020 addressed: ‘To whom it may concern’.
Date Amount ($) 12 September 2013 20,000.00 26 November 2013 15,262.70 2 December 2013 164,737.30 Total $200,000.00
The Tribunal accepts the amount of $20,000 withdrawn on 12 September 2013 from Westpac #6558 is the payment of the deposit, and the payment on 26 November 2013 of $15,262.70 is consistent with the bank cheque and the entry described by Mr Feng.
The difference in the above evidence is the final payment, which the Tribunal is satisfied went to Jiafa Shi because the bank cheque was made out in that name. The amount recorded by Mr Feng was $164,737.30 whereas the bank cheque was $176,103.59 (not $176,113.59 as stated by Mr Feng in his submission). The difference is $11,366.29, which Mr Feng says was paid for ‘other Fees’ without identifying what those fees were. From a review of the contract, the Tribunal understands stock to a maximum value of $5,000 was to be paid for in addition to the purchase price of $200,000. That may explain some of the difference and the Tribunal is unconcerned about that because the amount claimed for the purchase ($200,000) is less than the sum of the amounts paid $211,366.29).
On 3 September 2021, Jiafa Shi, whose name appears on the contract as vendor, signed a Statutory Declaration which says:
‘As the previous owner of Clarinda Fish & Chippery before December 2013, prior to selling my shop to Danging Kou on 02/12/2013, I have received the total payment of two hundred thousand dollars in full from her’.
The Tribunal is satisfied the partnership of Ms Kou and Mr Pan paid $200,000 for the goodwill of the takeaway business, plus $11,366.29 for other fees, in 2013 because of the evidence of funds transferred to the vendor and the statutory declaration confirming that. The balance sheet of the partnership shows an asset of $200,000 described as goodwill.
The contract is silent as to the apportionment of the sale price as between goodwill and plant and equipment. This is despite Schedule 1 of the contract referring to ‘Annexure 2: List of plant and equipment’ being included with the sale of the business. The financial statements for all years from 2017 to 2023 include at Note 1d. a description of the accounting policy about the carrying value of goodwill:
‘Goodwill is initially recorded at the amount by which the purchase price for a business exceeds the fair value attributed to its net assets at the date of acquisition. Purchased goodwill is amortised on a straight line basis over the period of 20 years. The balance is reviewed annually and any balance representing future benefits for which the realisation is considered to be no longer probable is written off.’
The Tribunal notes no impairment charge has been made against the carrying value of the goodwill as required by Note 1d and departmental policy, both of which mirror the requirements of the international accounting standards. No submission was made by Ms Kou or Mr Zhao about the need or otherwise for an impairment charge.
The Tribunal is charged with determining the net assets of the business, including the carrying value of the goodwill, on 23 October 2018 based on the financial statements for the year ended 31 July 2018. Goodwill purchased in connection with the acquisition of assets compromises the future benefits from unidentifiable assets which are not individually recognised.[15] The relevant accounting standard requires goodwill to be amortised over a period not exceeding 20 years, which is consistent with the Note 1d to the financial statements as discussed above.
[15] Australian Accounting Standards Board 1013 ‘Accounting for Goodwill’, section 5.
The accounting standard on goodwill applies to reporting entities and those preparing general purpose financial reports. As stated at Note 1a in the financial statements, the partnership of Ms Kou and Mr Pan is not a reporting entity, and it does not prepare general purpose financial reports. However, the accounting policy of the partnership, consistent with the relevant accounting standard, informs the Tribunal how to assess goodwill in this case.
The turnover of the takeaway business increased from $247,344 in 2017 to $308,324 in 2018 indicating an improvement in the performance of the business and an improvement in the current value of the future earnings of the business, which indicates the carrying value of goodwill had not diminished at that time.
Notwithstanding accounting policy note 1d requiring the carrying value of goodwill to be amortised over 20 years and reviewed at each year end, the lack of an impairment charge for the year ended 31 July 2018 and no submissions explaining the departure from the stated policy said to be used in the preparation of the financial statements, the Tribunal accepts the value of goodwill as at 31 July 2018 as $200,000 because of the increase in sales from 2017 to 2018.
Accordingly, the Tribunal finds the assets owned by Ms Kou and Mr Pan together in the takeaway business had a net value of at least $200,000 throughout the period of 12 months immediately before the application was made and so cl.888.225(2)(a) is met.
Ms Kou explained at the hearing she started her own business in China in 1993. It was called Nanjing Diao Commerce & Trade Co, Ltd and it was a distributor of various brands of cosmetics. She operated that business until the family moved to New Zealand in 2001 where they operated a take-away business called Te Atatu South Roast and Café. In 2006 they sold that business and returned to China where Mr Pan worked for Nanjing Golden Sunshine Consulting Firm and Ms Kou was employed by an ad agency called Nanjing Xihen Co. Ltd. In 2013 they came to Australia and purchased the takeaway business in Clarinda discussed in detail above.
Based on the evidence of Ms Kou and Mr Pan, the Tribunal is satisfied the funds brought to Australia by them were lawfully acquired and so finds cl.888.225(2)(c) is met.
The difficulty for Ms Kou in meeting the requirements of cl.888.225(2) lies in the diminishing value of the takeaway business, which is set out above where the annual turnover and profit are listed. This decline in the business indicates to the Tribunal the value of the goodwill may not be $200,000 as listed in the financial statements for the year ended 30 June 2023. The accounting policy for goodwill is discussed at length above.
On 12 June 2024, the Tribunal wrote to Ms Kou asking for a submission about the value of the business. She replied on 18 June 2024 and said in part:
‘Good morning. After reading the correspondence thoroughly, we would like to provide an explanation regarding the issues you have pointed out. Our business has indeed been continuously going down since 2019 for various reasons. My family has been working extremely hard but much to our sadness we were unable to improve it. Now I would like to speak to you frankly and heartfeltly about to our life in Australia and the difficulties we have encountered.’
Then:
‘At the start of 2019 there was a car accident at the shop where an elderly drove her car into our shop, causing damage to numerous facilities in the shop. As the facilities had to be repaired we were forced to shut down the shop for over two months, which has caused us to lose many of our customers. What’s more distressing for us was that the Bunning’s which was close to our shop had relocated away, once again causing us to lose many of our regular customers. Following that the terrible pandemic occurred, which heavily struck our business. For example, the suburb of Clarinda has many elderly people living there and the elderly couldn’t go out of home during the pandemic, we also were getting regular orders from a few aged care facilities near us which have also been lost since the pandemic. Therefore our business has been unable to improve since then and it was very difficult for us.’
Whilst the circumstances of Ms Kou and her family are regrettable, her submission confirms the observation of the Tribunal about the decline in the business resulting in a decline in the value of the goodwill of the business. Her submission does not specifically address the current value of the goodwill and it seems the Tribunal’s suggestion she obtain an independent valuation of the business was not taken up because no such valuation was included with her submission.
Accordingly, the Tribunal is unable to ascertain the current value of the goodwill and must rely on the declining sales and profits to conclude the value is less than $200,000 as shown on the balance sheet at 30 June 2023. By applying the stated accounting policy on goodwill, the Tribunal concludes the carrying value may be no more than $100,000 allowing for 10 years of amortisation out of a 20 year write off period. On that basis, the net business assets at 30 June 2023 would be:
30 June 2023 Net assets per balance sheet 10,893 % attributable to Ms Kou and Mr Pan 100% Applicants combined share of net assets 10,893 Add: Loan by the partners to the business 100,000 Net business assets 110,893
The Tribunal finds the net business assets on 30 June 2023 are less than $200,000 because the value of goodwill, which cannot be ascertained with any precision from the evidence provided, is highly likely to be less than its carrying value.
For these reasons, the Tribunal finds cl.888.225(2)(b) is not met.
Net business and personal assets: cl.888.225(4)
Ms Kou relies on her residence in Glen Waverley in Melbourne plus the net assets of the takeaway business to satisfy the requirements of cl.888.225(4).
On 16 February 2017, Ms Kou purchased the residence. The purchase price was $1,450,888 and Westpac provided a loan of $1M to complete the purchase. Ms Kou provided a current valuation of the property at $1.750M.[16] She also provided a statement from Westpac for loan account ending 5565 dated 9 April 2024 which shows a balance outstanding of $887,336. A similar loan statement in the department file shows a balance on 16 October 2018 of $988,372.
[16] Valuation by Prescott Valuations dated 9 April 2024.
Based on the above, the Tribunal finds the net value of the Glen Waverley property at relevant times was:
16-02-2017 23-10-2018 09-04-2024 Valuation 1,450,888 1,450,888 1,750,000 Loan outstanding 1,000,000 988,372 887,336 Net value 450,888 462,516 862,664
The Tribunal has found the net personal assets above are $862,664 and the net business assets at 30 June 2023 are $110,893, being a combined total of $973,557 and the Tribunal has already found the assets brought to Australia by Ms Kou and Mr Pan were lawfully acquired.
Accordingly, the Tribunal finds the net business and personal assets of Ms Kou and Mr Pan exceed $600,000 in the period of 12 months ending immediately before the application was and and continue to have that value.
For these reasons, the Tribunal finds cl.888.225(4) is met.
Turnover: cl.888.225(5)
The Tribunal has already established the turnover of the takeaway business for the year ended 31 July 2018 was $308,324. This amount was derived from financial statements prepared by Mr Wei Zhao of Kevinzhao The Company, Certified Practicing Accountants.
Accordingly, the Tribunal finds cl.888.225(5) is met.
CONCLUSION
Given the findings above, the Tribunal is not satisfied cl.888.225 is met. As one of the essential requirements for the visa is not met, the decision under review must be affirmed.
The Tribunal must also affirm the decision not to grant the secondary applicants Subclass 888 visas as they do not meet the secondary visa criterion (cl.888.311) requiring them to be members of the family unit of a person who holds a Subclass 888 visa, and there is no evidence they meet the primary visa criteria for this subclass.
REFERRAL TO THE MINISTER
Section 351 of the Act provides that, if the Minister thinks it is in the public interest to do so, the Minister may substitute for a decision of the Tribunal another decision, being a decision more favourable to the applicant, regardless of whether the Tribunal had the power to make that other decision.
In deciding whether to refer the matter to the Minister for consideration under section 351 the Tribunal has had regard to the President’s Direction on conducting migration and refugee reviews, especially at paragraphs 16.1 – 16.7 concerning referrals for ministerial intervention and the Minister’s guidelines on ministerial powers (s351, s417 and s501J) available in the Procedures Advice Manual 3 (the Minister’s Guidelines).
Among other things, the Minister’s Guidelines state the Minister may consider exercising his or her discretion in cases which exhibit one or more ‘unique or exceptional circumstances’. The Minister’s Guidelines then identify factors that may be relevant, individually or cumulatively, in assessing whether a case involves unique exceptional circumstances. They include the following:
(a) Strong compassionate circumstances that if not recognised would result in serious, ongoing and irreversible harm and continuing hardship to an Australian citizen or an Australian family unit, where at least one member of the family is an Australian citizen Australian permanent resident.
(b) Compassionate circumstances regarding the age and/or health and/or psychological state of the person, which if not recognised would result in serious, ongoing and irreversible harm and continuing hardship to the person.
(c) Exceptional economic, scientific cultural or other benefit would result from the person being permitted to remain in Australia.
(d) Circumstances in which the application of relevant legislation leads to unfair or unreasonable results in the case.
The Minister’s Guidelines further note relevant issues include circumstances which may bring Australia’s obligations as a party to the Convention on the Rights of the Child (CROC) into consideration and circumstances which may bring Australia’s obligations as a party to the International Covenant on Civil and Political Rights (ICCPR) into consideration. Tribunal notes CROC Article 3 provides: ‘In all actions concerning children, whether undertaken by public or private social welfare institutions, courts of law, administrative authorities or legislative bodies, the best interests of the child shall be a primary consideration’.
As part of the submission made on 18 June 2024, Ms Kou said this:
‘My whole family visited the beautiful nation of Australia on a trip in June 2012 and we immediately fell in love with this country. Because I am a New Zealand citizen, my sons are natural born NZ citizens and my husband is a permanent resident of New Zealand, we could work and study in Australia. Seeing that Australia was very advanced and developed in education, technology, medicine and career opportunities, we decided to move and settle in Australia in July 2013 to pursue a better life and career as well as for our sons to access better education. In September of the same year we bought the fish and chips shop in Clarinda and officially took over and started running the business in December (there wasn’t a policy specifically for NZ citizens to apply for the 888 visa at this time). Back then my two sons were in primary school and our entire family together worked very hard running the shop, and we were very glad to see the business gradually improving. After running the shop for five years (2018) we found out via friends that the government has introduced a new immigration policy where NZ citizens could apply for Permanent Residency via the 888 visa. We were delight about this and right away found a professional immigration agency who have checked all of our documents and materials individually against the eligibility criteria and deemed us perfectly eligible for the visa at the time, hence we lodged our application promptly in October 2018 (when we bought the business back then we didn’t think of it that we would have the opportunity to apply for a business visa, hence at the business handover we didn’t keep a good record of the financial transaction with the former business owner Jiafa Shi. This was a grave mistake on our part, which directly caused our immigration case officer Catherine to reject our application. Although we ended up finding the document later which was uploaded to AAT).’
Then:
Despite the poor business, my family of four has been working very hard. My two sons have respectively gained entry into Melbourne High School and John Monash Science School (two selective entry schools in Melbourne) and have gained numerous awards in Australian maths, science and geography competitions. They would study during day time and come to the shop to help us in the shop every night to ease our struggles. Despite this commitment they gained entry into the Medicine and Computer Science course at Monash University respectively. My older son Daniel now also teaches VCE mathematics to high school students in his spare time, while my younger son David works part-time at Vodafone mobile. I myself am also teaching local children Chinese at Chinese Culture School on the weekends. I believe my family to be meaningful members of our community and are working and studying hard right now in hopes of contributing more to the society here in Australia.
We understand now that the fact that our business was on the decline may have an impact on the successful approval of our permanent visa application. But we humbly ask that you consider our personal circumstances in processing our case, for we have toiled with hearts and hands in Australia for over a decade now. Whenever we see our friends around us getting the Australian PR via the 888 visa we feel a lot of regret for having made the mistake we did back then. We ask that Member Ranson and Associate Evans to please consider accepting our appeal. Thank you very much!
The Tribunal considers this is a case where the application of relevant legislation leads to unfair or unreasonable results because the delegate, with the best intentions, incorrectly found the net business assets were not sufficiently evidenced to meet the requirements of cl.888.225(2). The Tribunal has found that is not the case and the requirements were adequately met at the time of the delegate’s decision.
Otherwise, the applicants have met the requirements tested by the Tribunal other than net business assets at the time of this decision and the reasons for the decline in the value of the business have been adequately explained by Ms Kou.
Having regard to the relevant factors, individually and cumulatively, the Tribunal considers this a case where it would be appropriate to make a referral to the Minister.
DECISION
The Tribunal affirms the decisions not to grant the visa applicants Business Innovation and Investment (Permanent) (Class EC) visas.
Peter Ranson
Member
| Date of hearing: | 3 April 2024 |
| Type of hearing: | Teams video |
| Representation for the Applicant: | Self-represented |
| Interpreter: | Mandarin and English |
| Witnesses: | None |
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