Malik (Migration)

[2020] AATA 2538

Malik (Migration) [2020] AATA 2538 (24 March 2020)

Corrigendum

DIVISION:Migration & Refugee Division

APPLICANTS:  Mr Atif Malik

Master Hamdan Malik

Miss Harram Atif

Miss Hira Atif

Ms Sumera Atif

CASE NUMBER:  1831395

DIBP REFERENCE(S): BCC2016/4314548 BCC2017/95769 BCC2018/5226736 BCC2018/5624486 BCC2018/5782125 BCC2018/5782126

MEMBER:Robyn Anderson

DATE OF DECISION:  24 March 2020

DATE CORRIGENDUM

SIGNED:25 May 2020

PLACE OF DECISION:  Melbourne

AMENDMENT:  The following corrections are made to the decision:

·Closing decision ‘cl.892.221 of Schedule 2 to the Regulations’ will be amended to ‘cl.892.212 of Schedule 2 to the regulations’.

Robyn Anderson
Member

DECISION RECORD

DIVISION:Migration & Refugee Division

APPLICANTS:  

Mr Atif Malik

Master Hamdan Malik

Miss Harram Atif

Miss Hira Atif

Ms Sumera Atif

CASE NUMBER:  1831395

HOME AFFAIRS REFERENCE(S): BCC2016/4314548 BCC2017/95769 BCC2018/5226736 BCC2018/5624486 BCC2018/5782125 BCC2018/5782126

MEMBER:Robyn Anderson

DATE:24 March 2020

PLACE OF DECISION:  Melbourne

DECISION:The Tribunal remits the applications for Business Skills (Residence) (Class DF) visas for reconsideration, with the direction that the first named applicant meets the following criteria for a Subclass 892 (State/Territory Sponsored Business Owner) visa:

·cl.892.212 of Schedule 2 to the Regulations.

Statement made on 24 March 2020 at 1.00pm.

CATCHWORDS

MIGRATION – Business Skills (Residence) (Class DF) visa – Subclass 892 (State/Territory Business Owner) visa – financial requirements – direct and continuous management involvement in main business – pay and conditions of Australian citizen employee – net asset position in line with ATO period of reporting – director’s loans amounts – foreign currency transfers – decision under review remitted        

LEGISLATION

Migration Act 1958, ss 65, 134
Migration Regulations 1994, Schedule 2, cl 892.212; rr 1.03, 1.11

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 Home Affairs on 15 October 2018 to refuse to grant the visa applicants Business Skills (Residence) (Class DF) visas under s.65 of the Migration Act 1958 (the Act).

2. The applicants applied for the visas on 20 December 2016. At the time of application, Class DF contained four subclasses: Subclass 890 (Business Owner), Subclass 891 (Investor), Subclass 892 (State/Territory Business Owner) and Subclass 893 (State/Territory Sponsored Investor). The applicants in this case are seeking to satisfy the criteria for the grant of Subclass 892 (State/Territory Business Owner) visas, as set out in Part 892 of Schedule 2 to the Migration Regulations 1994 (the Regulations). At least one member of the family unit must satisfy the primary criteria set out in Subdivision 892.2. The others need only to satisfy the secondary criteria set out in Subdivision 892.3.

3. The delegate in this case refused to grant the visas on the basis that the first named visa applicant, Mr Malik, did not satisfy the requirements of cl.892.212 of Schedule 2 to the Regulations, as two of the three criteria were not satisfied. This was on the basis that Mr Malik did not meet the requirements under cl.892.212(a) of Schedule 2 to the Regulations. As such, his spouse or he and his spouse together were required to meet the financial requirements set out under cl.892.212(b) and cl.892.212(c) of Schedule 2 to the Regulations. As the delegate found that this was not the case, cl.892.212 of Schedule 2 to the Regulations was found not to be met.

4. On 13 September 2019, the Tribunal wrote to Mr Malik requesting further information.  The additional documents were provided by Mr Malik on 27 September 2019. The applicants appeared before the Tribunal on 22 November 2019 to give evidence and present arguments. The applicants were represented in relation to the review by their registered migration agent, Ms Ford.

5. The Tribunal deferred making a decision in this matter to allow time for Mr Malik to provide further evidence.  Following the hearing, Mr Malik was granted an extension of time and provided further information on 13 January 2020.  At the Tribunal’s request, additional information was provided by Mr Malik on 13 January 2020, 29 January 2020 and 17 March 2020.

6. For the following reasons, the Tribunal has decided that the matter should be remitted for reconsideration.

   Non-disclosure certificate issued pursuant to s.375A of the Act

7. The Department issued a non-disclosure certificate over four folios contained in its file pursuant to s.375A of the Act.  The non-disclosure certificate is dated 24 November 2018 and states that disclosure of the material in folios 14a to 15b inclusive of the Departmental file would be contrary to the public interest because “the information would disclose confidential Departmental investigative methods, techniques used to detect breaches of the law, names of Departmental Officer(s) and officer(s) of other agency”. 

8. In response to a request from the applicant on 5 December 2018 for access to written material relating to their applications for review, the Registrar provided the written materials on 14 February 2019.  A letter of the same date advised that folios 14a to 15b had been excluded from the material provided because they were subject to a certificate made by the

   Department under s.375A of the Act as their disclosure would be contrary to the public interest. 

9. The Tribunal considered the contents of the non-disclosure certificate and was satisfied that it was valid. However, the Tribunal does not consider that the material in folios 14a to 15b inclusive has any relevance to the issue of assessing cl.892.212 of Schedule 2 to the Regulations.

   CONSIDERATION OF CLAIMS AND EVIDENCE

10. Mr Malik told the Tribunal that he had been running the family import/export business in the natural rubber industry in Pakistan since around 2000.  He and his wife wanted to build a good future for their children and decided to apply for a State Sponsored Business Owner (Temporary) (subclass 163) visa, which was subsequently granted in April 2013. He further stated that he then commenced winding down the family business.  The business was not of a type that could be readily sold.  However, Mr Malik stated that he was able to sell the remaining stock for approximately AUD$125,000.  Upon his arrival in Australia he planned to enter into the retail sector in Australia and purchased the United Petroleum franchise in Yarra Glen in August 2014 in the name of Malik Sons Pty Ltd as trustee for Malik Family Trust (the Business).

11. Mr Malik explained that operation of the shop within the premises is run solely by the Business and has no connection to United Petroleum.  He invested approximately $100,000 in the initial stock and sells drinks, snacks and tobacco products.  He further stated that in October 2018 he purchased a second United Petroleum franchise in Wandin, also in the name of the Business. He has renovated the premises and commenced operations in January 2019.

12. The issue in the present case is whether the requirements of cl.892.212 of Schedule 2 to the Regulations are met by Mr Malik.

13. There is no evidence before the Tribunal to suggest that there is an exceptional circumstance determination by an appropriate regional authority in this case. Therefore, cl.892.212 of Schedule 2 to the Regulations requires the applicant, the applicant’s spouse, or the applicant and his spouse, together in the main business or main businesses in Australia to meet at least two of the three requirements under cl.892.212(a), 892.212(b) or 892.212(c) of Schedule 2 to the Regulations at the time of application and in the 12-month period immediately prior to the application date. As Mr Malik lodged his application on 20 December 2016, the relevant period is from 20 December 2015 to 19 December 2016. Mr Malik confirmed to the Tribunal that he is seeking to meet the criteria under cl.892.212(a) and 892.212(c) of Schedule 2 to the Regulations.

14. The meaning of ‘main business’ is set out in regulation 1.11(1) of the Regulations (as defined in regulation 1.03). Mr Malik nominated the Business as the main business in his application. The four criteria are not mutually exclusive and must all be met before a nominated business can be considered as the ‘main business’. 

15. The first of the criteria under Regulation 1.11(1)(a) requires that the applicant have an ownership interest. Regulation 1.03 provides that ownership interest has the meaning given to it in s.134(10) of the Act. The definition of ownership interest in relation to a business as relevantly defined in s.134(10) of the Act means, amongst other things, “a shareholder in the company that carries on the business” and also an ownership interest held indirectly through a trust.

16. In this case Malik Sons Pty Ltd is the corporate trustee of Malik Family Trust.  It does not operate in its own right, rather, it operates the Business on behalf of the Trust. ASIC records confirm that Mr Malik has been the sole director, secretary and shareholder since incorporation on 6 August 2014 and continues to be so.  According to the discretionary trust deed in respect of Malik Family Trust, created on 6 August 2014, Malik Sons Pty Ltd is the trustee and Mr Malik and Ms Atif are the named beneficiaries.  Mr Malik is recorded as the appointor.  As such, he is the “ultimate controller” of Malik Family Trust. Clearly, the first criterion in r.1.11(1)(a) is met.

17. 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. Mr Malik described in detail to the Tribunal the daily operations of the Business from dealing with United Petroleum head office and at times their representative on-site to inventories and the interaction with his accountant.  It is Mr Malik’s signature on all associated legal documents. Based on the evidence before it the Tribunal accepts that Mr Malik has control of all aspects of the Business on a day-to-day basis and makes the decisions impacting the direction and performance of the Business.  Therefore, the second criterion in r.1.11(1)(b) is met. 

18. 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.  As the Business is not operated by a publicly listed company, the required ownership interest must be at least 30% if the annual turnover is greater than or equal to $400,000 and at least 51% if the annual turnover is less than $400,000.  The turnover, or sales in the 2015/2016 year were $715,954 and have continued to exceed $400,000 per annum in each year following, including the 2018/2019 year.  As the annual turnover is greater than $400,000  and as the Tribunal determined above that Mr Malik held 100% ownership interest in the Business the third criterion in r.1.11(1)(c) is clearly met.

19. Finally, the Business must be a qualifying business. ‘Qualifying business’ is defined in regulation 1.03 as an enterprise that is operated for the purpose of making a 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. Based on the financial statements, the Business made a net profit in the 12-month periods ending 30 June 2015, 30 June 2016, 30 June 2017, 30 June 2018 and 30 June 2019 of $57,336, $52,022, $24,121, $72,397 and $$69,278 respectively. The Tribunal is satisfied that the Business is operating for the purpose of making a profit through the provision of good and services.  Furthermore, there is no evidence to indicate that any part of the business is operated for the purpose of speculative or passive investment.  Therefore, the Tribunal finds that the Business is a qualifying business, thereby satisfying the criterion in r.1.11(1)(d).

20. As all four criteria under r.1.11(1) are met, the Tribunal finds that the Business can be considered as the ‘main business’.

    Cl.892.212(a) - Provision of the equivalent of full-time employment

21. Subclause 892.212(a) relates to the Business providing the equivalent of full-time employment to a person/s that is not a family member and is also an Australian citizen or Australian permanent resident or a New Zealand passport holder, in the relevant period from 20 December 2015 to 19 December 2016.

22. Mr Malik gave oral evidence that he initially completed all of the necessary tasks, requiring 16-hour days, and seven days per week.  At that time the children were young so his wife spent the majority of her time caring for them.  After three to four months he came to the

    realisation that he needed assistance. He told the Tribunal that he advertised the position on the internet and employed Mr Manchandan to commence on 1 October 2015. Mr Manchandan’s passport indicates that he was born in New Delhi and upon issue on 20 March 2014, he was an Australian citizen.  There is no evidence to suggest that Mr Manchandan is related to Mr Malik in any capacity. Mr Malik gave oral evidence that he employed Mr Manchandan on a full-time basis.

23. The PAYG Summaries of Mr Manchanda issued by the Business and submitted to the ATO in the 2015/2016, 2016/2017 and 2017/2018 years were before the Tribunal, as were the Payment Summaries Annual Report of the Business submitted to the ATO in respect of the 2015/2016, 2016/2017 and 2017/2018 years.  They reflected an employment start-date of 1 October 2015 in respect of Mr Manchandan which continued until into the 2017/2018 year.  Mr Manchandan’s tax file number declaration form was signed on 1 September 2015.  The 2015/2016 PAYG Summary of Mr Manchandan records gross wages of $28,899 and the 2016/2017 PAYG Summary of Mr Manchandan records gross wages of $38,532. 

24. In response to a question from the Tribunal, Mr Malik stated that he paid Mr Manchandan’s weekly wages in cash.   Despite payslips being before the Tribunal for the period 28 September 2015 to 25 September 2016, Mr Malik conceded that they were not provided on a regular weekly basis to Mr Manchandan.  Rather, they were prepared upon request and in particular for the Department. However, he stated that they were an accurate reflection of the payments made to Mr Manchandan. The Tribunal observed that the pay slips recorded weekly gross wages of $741, being 38 hours per week at the hourly rate of $19.50.  When allocated across the period 1 October 2015 to 30 June 2016, the amount of $28,819 closely aligns to the gross wages recorded on the 2015/2016 PAYG Summary of Mr Manchandan of $28,899.  Furthermore, the weekly gross wages of $741 annualises to $38,532 and corresponds to the gross wages recorded on the 2016/2017 PAYG Summary of Mr Manchandan. 

25. The Tribunal was satisfied that the wages and PAYG withheld as recorded on the quarterly business activity statements aligned with the Payment Summaries Annual Reports.  It was also evident that the tax returns and financial statements corresponded accordingly.

26. Evidence was before the Tribunal in respect of the superannuation guarantee payment statement recording a payment made on 10 August 2016 in the amount of $2,745.41 on behalf of Mr Manchandan in respect of the period 1 October 2015 to 30 June 2016. The payment represented 9.5% of his gross wages, as recorded on his PAYG summary and aligned to the payment to Care Super recorded on the bank statement of the Business on 10 August 2016.  Further payments to Care Super were evident on the bank statement of the Business at 3 September 2017, representing 9.5% superannuation guarantee payments for Mr Manchandan to 31 May 2017.  Mr Manchandan ceased employment in December 2017, which was reflected by the gross wages recorded on his 2017/2018 PAYG Summary. 

27. Mr Malik gave oral evidence that as the children were older his wife now had the capacity to assist in the Business and Mr Manchandan wanted to move on.   He decided to put on a part-time, casual employee to enable him and his wife to spend more time with the children on the weekends.

28. The Tribunal notes that no work cover premiums were paid in respect of Mr Malik or Mr- Manchandan. Mr Malik told the Tribunal that he was not advised of this requirement by his lawyer. While this is a legal requirement under Worksafe Victoria, such a requirement is not prescribed in the Regulations. For the purposes of cl.892.212(a) of Schedule 2 to the Regulations, the Tribunal finds that overlooking such a requirement does not negate the fact that the Business provided the equivalent of full-time employment to an Australian citizen

    who was not a family member in the period 20 December 2015 to 19 December 2016. Consequently, cl.892.212(a) of Schedule 2 to the Regulations is met.

    Cl.892.212(c) – Net Business Assets

29. Clause 892.212(c) of Schedule 2 to the Regulations relates to whether the applicant, the applicant’s spouse, or the applicant and his spouse, held assets in the Business in Australia at the time of application that have a net value of at least AUD75,000 and had a net value of at least AUD75,000 throughout the period of 12 months ending immediately before the application was made, and that these assets were legally acquired. As noted above, the relevant period is 20 December 2015 to 19 December 2016.

30. Mr Malik provided financial statements at 30 September 2015 and 30 September 2016 to the Department. Prior to hearing, Mr Malik’s representative provided financial statements of the Business at 30 June 2015 and 30 June 2016, submitting that it makes more reasonable business sense to assess the net asset position of Mr Malik’s interest in the Business at 30 June, in line with the period of reporting required by the ATO.  A further written submission from Mr Malik’s accountant, Mr Patel of Astra Consulting Accountants and Business Advisors, dated 15 November 2019, maintained that the net assets of Mr Malik in the Business exceeded AUD$75,000 at 30 September 2015, 30 September 2016, 30 June 2015 and 30 June 2016.

31. As discussed at hearing, the Tribunal does not consider 30 June as an appropriate period to consider in these circumstances.  As the journal entries recording the distributions to the beneficiaries are recorded at 30 June against the respective loan accounts, it results in an inflated balance.  This is particularly so when upon examination of the general ledger accounts of the beneficiaries, it is evident that drawings against the beneficiary loan accounts commence almost immediately and are substantially drawn down in the first few months of the new financial period.  

32. In respect of the financial statements at 30 September 2015 and 30 September 2016, the Tribunal had reservations as to the accuracy of the figures recorded on the balance sheets.  The loan accounts did not necessarily equate to the general ledger accounts, the inventory at 30 September 2016 had not changed since 30 June 2016, there was no depreciation calculation between 30 June 2015 and 30 September 2016 and the bank balances did not align to the bank statements. The Tribunal acknowledges that bank reconciliation may clarify the issue of the bank balances. However, it is also noteworthy that no debtors or creditors are accounted for.  Consequently, given the evidence before the Tribunal, the Tribunal proposed to calculate the net asset value of Mr Malik and his spouse’s interest in the Business at 20 December 2015 and 19 December 2016.  Mr Malik did not dispute the Tribunal’s proposal and the Tribunal therefore proceeded on this basis.

33. In relation to the calculation of the net business assets, or equity for a trust such as the Business, PAM3 sets out a formula in relation to calculation of net business assets. Such a formula is notably absent from the Regulations. All in all, the Tribunal must satisfy itself that the assets and liabilities recorded in the respective balance sheets are correctly valued, including the director’s loan account and the beneficiary loan accounts.

1. Policy allows loans by directors and beneficiaries to be taken into consideration when calculating the net assets of the business, 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. Accordingly, the director’s loans can be added to the calculation of the net assets of the business.

2. The Tribunal examined the general ledger accounts in respect of the loans and cross-checked the entries against the bank statements.  The Tribunal is satisfied that overall they are reliable.  If anything, given that there were transactions identified by the Tribunal in the bank statements that appeared to have been omitted from the general ledger accounts, it is likely that the loan accounts could be higher than recorded in the balance sheets. Therefore, the Tribunal is satisfied that it is appropriate to add back the directors loans in the amounts as recorded in the general ledger account at 20 December 2015 and 19 December 2016 of $77,789 and $83,125 respectively.

3. In respect of assets, cash at bank was verified by the bank statements and cash on hand by the next cash deposit processed on the bank statement after 20 December 2015 and 19 December 2016, of 21 December 2015 and 20 December 2016. The guarantee of $50,000 as required by United Petroleum was verified by copies of the CBA term deposit account.  Mr Malik agreed that an average of the finished goods value of $26,183, based on the average of the recorded figures at 30 June 2015, 30 June 2016 and 30 September 2016 was reasonable.  The Tribunal calculated the written down value of plant and equipment based on the prime cost depreciation rate of 30% as used at 30 June 2015 and 30 June 2016.  The Tribunal notes that the plant and equipment was written off in full at 30 June 2017. The Australian Accounting Standards Board (AASB) defines an “asset” as something from which future economic benefits are expected to flow to the entity.  Formation expenses are an “intangible asset” and represent a past expense that is gradually being amortised over time and clearly does not represent future value or benefit to the Business.  Accordingly, the Tribunal finds it appropriate to ignore the formation expenses recorded as an asset in the balance sheet. 

4. In respect of the liabilities, while ordinarily at 20 December 2015 and 19 December 2016, all ATO business activity statement liabilities would be fully paid, based on the ATO portal print-outs, the outstanding balances of the integrated client account at 20 December 2015 and 19 December 2016 were $1,574 and $1,115 respectively.  The Business does not incur a tax liability as all profits are taxed in the hands of the beneficiaries upon distribution at the end of each financial year. Accordingly, the Tribunal calculates the net asset value of Mr Malik and his spouse’s interest in the Business at 20 December 2016 and 19 December 2016 to be as set out in the table below.

PARTICULARS	20/12/2015 AUD$	19/12/2016 AUD$
Cash at bank	803.89	2,319.65
Term deposit guarantee	50000.00	50000.00
Cash on hand	9200.00	3440.00
Finished goods	26183.00	26183.00
Plant and equipment at cost	7,995	7,995
Total depreciation at 30% prime cost	(3,535)	(5,927)
Total assets	90,646.89	84,010.65
ATO - integrated client account	(1,574)	(1,115)
Loan- A Malik	(63,252.83)	(61,172.68)
Ben loan – A Malik	(14,536.22)	(19,450.19)
Ben loan – S Atif	0	(2,503.11)
Total liabilities	79,363.05	84,240.98
Net Assets/Equity	11,283.84	(230.33)
PLUS director and beneficiary loans	77,789.05	83,125.98
NET ASSETS  for the purpose of cl.892.212(c)	89,072.849	82,895.65

1. As can be seen from the table above, the net assets of Mr Malik and his spouse in the Business exceed AUD$75,000 at both the relevant points in time. The Tribunal then turned its mind to whether the assets had been lawfully acquired. 

2. Mr Malik gave oral evidence that the funds raised through sale of stock on hand from the business he operated in Pakistan were brought to Australia to assist in setting up the Business.  He used the funds to provide the guarantee of $50,000 to United Petroleum and also to purchase inventory for the retail arm of the petrol station.  Amongst smaller incidental amounts, the general ledger account of the directors loan recorded the $50,000 loan to the Business on 12 August 2014 and a further loan of $44,300 on 22 August 2014.  In response to a question from the Tribunal, Mr Malik stated that he brought the maximum amount of cash he could with five family members when he came to Australia, in addition to several foreign transfers. 

3. Following the hearing, Mr Malik provided a written submission clarifying that the first transfer in April 2013 was to his sister and brother-in-law’s CBA joint account (Mr Sadiq and Mrs Saeed) and consisted of his own funds in the amount of AUD$32,000 and a further AUD$29,900 from the sale of land owned by his brother-in-law in Pakistan, totalling $61,900. The corresponding foreign currency transfer receipt from Multinet Trust Exchange LLC and the CBA bank statement recording the deposit were provided to the Tribunal.

4. The second transfer, on 1 July 2013 was to Mr Malik’s sister’s ANZ account in the amount of $29,340.  Mr Malik provided evidence in the form of emails between him and his brother-in-law and a copy of his sister’s ANZ bank statement recording receipt of the international transfer on 1 July 2013.

5. Further documents before the Tribunal included evidence of the numerous withdrawals from Mr Malik’s personal AL Habib bank account in Pakistan on dates that align to the two foreign currency transfers and a copy of the bank cheque drawn from his sister’s company, MY Enterprise Pty Ltd, in the amount of $49,151 deposited into the ANZ account of the Business within days of the transfer in July 2014.

6. The Tribunal accepts the oral and written evidence of Mr Malik and is therefore satisfied that the funds invested into the net assets of the Business were lawfully acquired by Mr Malik. Accordingly, the Tribunal finds that all of the required criteria under cl.892.212(c) of Schedule 2 to the Regulations are met.

7. Given the findings above, as two of the three requirements under cl.892.212 have been met, it follows that cl.892.212 of Schedule 2 to the Regulations was met at the time of application. Therefore, the appropriate course is to remit the matter to the Minister to consider the remaining criteria for the visa.

8. The Tribunal finds that as the second, third, fourth and fifth named applicants applied on the basis of being family unit members of the first named applicant, their applications will be determined by reference to the outcome of the first named applicant’s application on remittal to the Department for reconsideration.

   decision

9. The Tribunal remits the applications for Business Skills (Residence) (Class DF) visas for reconsideration, with the direction that the first named applicant meets the following criteria for a Subclass 892 visa:

   ·cl.892.221 of Schedule 2 to the Regulations.

   Robyn Anderson
   Member