N1 HOLDINGS LIMITED (Migration)

N1 HOLDINGS LIMITED (Migration) [2020] AATA 330 (13 February 2020)
DECISION RECORD
DIVISION:Migration & Refugee Division
APPLICANT:  N1 HOLDINGS LIMITED
CASE NUMBER:  1721446
HOME AFFAIRS REFERENCE:               BCC2017/2111320
MEMBER:Lilly Mojsin
DATE:13 February 2020
PLACE OF DECISION:  Sydney
DECISION:The Tribunal affirms the decision under review to refuse the nomination.

Statement made on 13 February 2020 at 10:32am
CATCHWORDS
MIGRATION – Nomination – Direct Entry Nomination stream – financial capacity of business – declining gross revenue – full time position – not satisfied of financial capacity of business – decision under review affirmed

LEGISLATION
Migration Act 1958 (Cth)
Migration Regulations 1994 (Cth), r 5.19

STATEMENT OF DECISION AND REASONS
APPLICATION FOR REVIEW

This is an application for review of a decision made by a delegate of the Minister for Immigration on 23 August 2017 to reject the applicant’s application for approval of the nomination of a position in Australia under r.5.19 of the Migration Regulations 1994 (the Regulations).
The requirements for the approval of the nomination of a position in Australia are found in r.5.19 of the Regulations which contains two alternative streams: a Temporary Residence Transition nomination (r.5.19(3)) stream and a Direct Entry nomination (r.5.19(4)) stream. If the application is made in accordance with r.5.19(2) and meets the requirements of either stream, then the application must be approved. If any of the requirements are not met then the application must be refused: r.5.19(5).
The applicant applied for approval of the nomination of a position in Australia on 15 June 2017.
The applicant was seeking to satisfy the criteria in the Direct Entry Nomination stream, for the approval of a nominated position of Sales and Marketing Manager (ANZSCO 131112) to employ Ping Du[1] [nominee].
[1] AAT 1723767
The delegate refused the application on the basis the applicant’s nomination did not satisfy r.5.19(4)(d) of the Regulations because the Delegate was not satisfied the applicant was able to provide the nominee with full-time employment for at least two years.
The applicant, represented by its Executive Chairman and CEO, Ren Hor Wong, appeared before the Tribunal on 6 February 2020 to give evidence and present arguments in a joint hearing, together with the related review of the visa refusal of the nominee, Ping Du, who appeared before the Tribunal via telephone from China. She also gave evidence to the Tribunal.
The applicant was represented in relation to the review by its registered migration agent.
CONSIDERATION OF CLAIMS AND EVIDENCE
In documents provided to the Tribunal the applicant describes its business N1 Holdings Limited (N1) as a business, financial and property services firm that operates under the brand “N1 Loans”, “N1 Realty”, “N1 Migration” and “N1 Venture”.
The delegate found that the company’s financial performance indicated a pattern of increasingly declining gross revenue with a huge business loss of more than a million dollars for the year ending 30 June 2016 – without evidence of any indicator of potential business growth to recover from the million-dollar loss in 2016. The delegate found that the nominator was not in a sound financial position to guarantee full-time employment to the nominee for at least two years.
The applicant provided to the Department and the Tribunal the following documents
·Business Profile Foreign Investment Review Board 2015
·Business Profile Awards 2015
·Business Profile Awards 2016
·Job Advertisement – Sales Manager
·Job Advertisement – Sales Manager
·Market Salary Report
·Job Outlook
·Payslip – Jessie – 04/17 employed by N1 Loans
·Payslip – Michael – 04/17 employed by N1 Loans
·Training Benchmark B Requirements
·Payroll Activity Summary – N1 Loans
·Payroll Activity Summary – N1 Migration
·Payroll Activity Summary – N1 Realty
·Employment Agreement
·Employment Agreement – Signatures
·BAS - Holdings – 06/19 to 03/17
·BAS – Loans – 07/16 to 03/17
·Financial Statements FY16
·Tax Return (Loans) FY16
·Tax Return (Holdings) FY16
·ACL Licence
·Realty Corporations License
·Venture AFSL Licence
·Venture Corporation Licence
·ASIC Change of Name
·ASIC Certificate of Registration
·ASIC Current and Historical Extract
·ASIC WHL Certificate of Registration of a Company
·Company Chart
·Organisational Chart
·Genuine Position Report
·Training Expenditure
·Genuine Position Report
·Payslips - Jessie
·Current Contract
·Tax Return FY18
·Tax Return FY19
·BAS 10/17 to 09/19
·Financial Statements FY18
·Financial Statements FY19
·Annual Report FY18
·Annual Report FY19
·Business Licence
·Need for Nominee
·N1 Group Company Chart
·Organisational Chart
·Current and Historical Extract
·Company Summary
Income tax returns and other financial documents before the Tribunal indicate as follows:
·     year ending 30 June 2015, gross income of $4 017 760 and business loss of ($1 295 276 ).
·     year ending 30 June 2016, gross income of $1 198 369 and business loss of ($1 165 284).
·     year ending 30 June 2017, revenue $3 213 581 and business loss ($1 643 006)
·     year ending 30 June 2018 income $3 659 596 and business loss ($2 151416)
·     year ending 30 June 2019 income $4 093 018 and business loss ($2 605 372)
The applicant advised the Tribunal that N1 Holdings is the head company and holds shares in the different subsidiaries. N1 Holdings group of companies has about 21 employees. The applicant was not aware of how many employees N1 Holdings employed. The applicant confirmed that the nominee is to be employed by N1 Holdings and there is no-one presently employed in the nominee’s role.
The Contract of Employment for the nominee indicated that the nominee would receive a base salary of $181,000 and combined with superannuation, the annual salary would be $198 195.
The Tribunal discussed with the applicant the business losses of the company. Losses appeared to be increasing and in that situation, companies facing a downturn maybe forced to reduce operational output and shed staff. These losses did not demonstrate that the applicant had the financial capacity to meet the costs of employing the nominee on a full-time basis for at least 2 years.
The applicant said that the reasons the company is incurring losses is because they went public in 2016 and raised $5m to accelerate growth and spend money on expenses. The reasons why the company is incurring losses is that they are growing and incurring losses and this is normal practice. It is the change of reporting standard from a public company to a private company. A lot of the losses are accounting losses and not cash loss and if one looks at revenue growth, it is going up and it can be seen that the wages growth is increasing to enable the company to capture market share. One of the reasons the company needs more staff is the strategy. All the published figures are public information on the ASX. An example in the latest quarter is that they have an operating net cash roll of $300 000. N1 Holdings publish quarterly their income and the cash receipts from quarter to quarter are increasing. It is cash receipts from customers. That shows the cash receipt is different from financial reports.
The Tribunal put to the applicant that the tax returns continue to show losses and the losses are increasing. The applicant responded that the way he reports are the AASP, Australia Accounting Standard Board and they require a particular method of reporting. They have a lot of depreciation and amortatisation meaning the company is making a lot of investment. As a company, they pay payroll tax. The company is contributing payroll tax and contributing to the economy. N1 Holdings is in the business of bringing investment into Australia and is contributing to the economy of Australia.
The nominee stated that she has many years of experience in international sales and marketing and will do the position. N1 Holdings is a public company and revenue is increasing, it is deemed as one of the leaders.
REASONS AND FINDINGS
The issue in this review is whether the applicant meets the requirements for approval of the nomination under the Direct Entry nomination stream set out in r.5.19(4), which is extracted in the attachment to this decision.
Regulation 5.19(4)(d) requires the nominee to be employed in the nominated position for at least 2 years full time, and the terms and conditions of that employment do not expressly exclude the possibility of an extension.
When assessing whether the business has the capacity to meet its employment obligations, in regard to the nominee for a period of at least two years, the Tribunal is mindful that the assessment is based on a future projection of the financial capacity of the business in an environment that is subject to change.
The applicant agreed that the historical financial data indicates that the company has been making losses. His explanation is that there was a change of reporting standard from a private company to a public company.
The Tribunal accepts that all the published figures are public information on the ASX. The Tribunal also accepts that there is a change in reporting standards but the Tribunal is not satisfied that reporting standards of themselves affected the amount of losses made by the company.
The Tribunal accepts the applicant pays payroll tax. The Tribunal notes that the applicant has stated that the wages growth is increasing to enable the company to capture market share but the expenses for N1 Holdings, shown in Financial Report for 2019 prepared by Crowe Sydney, indicates the 2018 employee costs were $2 811 083 and these costs decreased in 2019 by $300 000, and were $2 503 698. As for the net assets, the Tribunal notes that in 2018 the net assets were $2 262 638 and in 2019 the net assets were $233 520.
Whilst the Tribunal accepts that the revenue of the applicant for 2018 was $3 596 657, and in 2019 increased to $4 057 306, and the Tribunal accepts that in the latest quarter the applicant has an operating net cash roll of $300 000, as the net assets have decreased and the overall business losses of the applicant were in 2018 ($2 151 416) and in 2019 ($2 605 372) the Tribunal is not satisfied that these losses are reflective of a change from a private company to a public company nor a change in reporting methods.
There is no evidence before the Tribunal to suggest that losses incurred by the applicant are due to investments for capturing market share and business growth. As for the applicant’s claim that the actual cash receipt by the company is different to what is stated in the financial reports the Tribunal relies on the company’s financial report as evidence of the applicant’s financial position.
In light of the net assets decreasing and the business losses continuing to increase since 30 June 2015, irrespective of the company’s ASX listing, the Tribunal is not satisfied that the applicant will have the capacity to employ the nominee on a full-time basis in the position for at least 2 years.
Accordingly, the requirement in r.5.19(4)(d) are not met.
For the above reasons the Tribunal is not satisfied that the applicant meets the requirements of r.5.19(4). The applicant has not sought to satisfy the criteria in Temporary Residence Transition Nomination stream, and as such has not met the requirements in r.5.19(3). Accordingly, the nomination of the position cannot be approved. Therefore, the Tribunal must affirm the decision under review.
DECISION
The Tribunal affirms the decision under review to refuse the nomination.
Lilly Mojsin
Member

ATTACHMENT - EXTRACTS FROM THE MIGRATION REGULATIONS 1994
5.19Approval of nominated positions (employer nomination)
…
(2)The application must:
(a)be made in accordance with approved form 1395…; and
(aa) include a written certification by the nominator stating whether or not the nominator has engaged in conduct, in relation to the nomination, that constitutes a contravention of subsection 245AR(1) of the Act; and
(b)be accompanied by the fee mentioned in regulation 5.37.
…
Direct Entry nomination
(4)The Minister must, in writing, approve a nomination if:
(a)the application for approval:
(i)       is made in accordance with subregulation (2); and
(ii)      identifies a need for the nominator to employ a paid employee to work in the position under the nominator’s direct control; and
(b)the nominator:
(i)       is actively and lawfully operating a business in Australia; and
(ii)      directly operates the business; and
(c)for a nominator whose business activities include activities relating to the hiring of labour to other unrelated businesses — the position is within the business activities of the nominator and not for hire to other unrelated businesses; and
(d)both of the following apply:
(i)       the employee will be employed on a full-time basis in the position for at least 2 years;
(ii)      the terms and conditions of the employee’s employment will not include an express exclusion of the possibility of extending the period of employment; and
(e)the terms and conditions of employment applicable to the position will be no less favourable than the terms and conditions that:
(i)       are provided; or
(ii)      would be provided;
to an Australian citizen or an Australian permanent resident for performing equivalent work in the same workplace at the same location; and
(f)either:
(i)       there is no adverse information known to Immigration about the nominator or a person associated with the nominator; or
(ii)      it is reasonable to disregard any adverse information known to Immigration about the nominator or a person associated with the nominator; and
(g)the nominator has a satisfactory record of compliance with the laws of the Commonwealth, and of each State or Territory in which the applicant operates a business and employs employees in the business, relating to workplace relations; and
(h)either:
(i)       both of the following apply:
(A)the tasks to be performed in the position will be performed in Australia and correspond to the tasks of an occupation specified by the Minister in an instrument in writing for this sub-subparagraph;
(AAA)the occupation is applicable to the person identified under subparagraph (a)(ii) in accordance with the specification of the occupation;
(B)either:
(I)the nominator’s business has operated for at least 12 months, and the nominator meets the requirements for the training of Australian citizens and Australian permanent residents that are specified by the Minister in an instrument in writing for this sub-sub-subparagraph; or
(II)the nominator’s business has operated for less than 12 months, and the nominator has an auditable plan for meeting the requirements specified in the instrument mentioned in sub-sub-subparagraph (I); or
(ii)      all of the following apply:
(A)the position is located in regional Australia;
(B)there is a genuine need for the nominator to employ a paid employee to work in the position under the nominator’s direct control;
(C)the position cannot be filled by an Australian citizen or an Australian permanent resident who is living in the same local area as that place;
(D)the tasks to be performed in the position correspond to the tasks of an occupation specified by the Minister in an instrument in writing for this sub-subparagraph;
(DA)the occupation is applicable to the person identified under subparagraph (a)(ii) in accordance with the specification of the occupation;
(E)the business operated by the nominator is located at that place;
(F)a body that is:
(I)specified by the Minister in an instrument in writing for this sub-subparagraph; and
(II)located in the same State or Territory as the location of the position;
has advised the Minister about the matters mentioned in paragraph (e) and sub-subparagraphs (B) and (C).

[2020] AATA 330

13 February 2020

Key Legal Topics

Areas of Law

Immigration

Administrative Law

Legal Concepts

Judicial Review

Statutory Construction

Procedural Fairness