Naghy Pour (Migration)
[2020] AATA 5252
•7 December 2020
Naghy Pour (Migration) [2020] AATA 5252 (7 December 2020)
DECISION RECORD
DIVISION:Migration & Refugee Division
APPLICANT: Mr Ali Naghy NAGHY POUR
CASE NUMBER: 1910794
DIBP REFERENCE(S): BCC2017/3551968 BCC2017/3721056 BCC2017/3721073 BCC2017/3721115
MEMBER:Peter Ranson
DATE:7 December 2020
PLACE OF DECISION: Brisbane
DECISION:The Tribunal remits the application for a Business Skills (Residence) (Class DF) visa for reconsideration, with the direction the visa applicant meets the following criteria for a Subclass 890 (Business Owner) visa:
·cl.890.211 and cl.890.212 of Schedule 2 to the Regulations.
Statement made on 07 December 2020 at 9:35am
CATCHWORDS
MIGRATION – Business Skills (Residence) (Class DF) visa – Subclass 890 (State/Territory Business Owner) – ownership interest in actively operating main business for two years before application made – half-share held by applicant’s wife, who died during two-year application period – involvement in management of business – time spent offshore during application period due to wife’s illness in home country – communication with and direction of employee – net business assets – business premises held by applicant personally and not by business – premises used exclusively in the business – decision under review remitted
LEGISLATION
Migration Act 1958 (Cth), ss 65, 134, 360
Migration Regulations 1994 (Cth), rr 1.03, 1.11, 1.11A, Schedule 2, cls 890.211, 890.212
CASES
Cheung v MIMIA (2005) 143 FCR 117
Shahpari v Minister for Border Protection [2016] FCCA 513
Yang v Minister for Immigration and Border Protection [2014] FCCA 1576
STATEMENT OF DECISION AND REASONS
Table of Contents
APPLICATION FOR REVIEW
CONSIDERATION OF CLAIMS AND EVIDENCE
Ownership interest in main business
Does the applicant have an ownership interest in each business relied on at all relevant times?
Was each business relied on actively operating at all relevant times?
Does each business relied on satisfy the definition of ‘main business’, at all relevant points in time?
Australian Business Number and Business Activity Statements
Requirements relating to applicant’s assets in the main business
The Merrylands Road Property
Dubai Union net assets
Departmental policy
Adjusted net business assets
Assets must have been lawfully acquired
DECISION
ATTACHMENT A - Legislation
Migration Regulations 1994
1.03 Definitions
1.11 Main business
1.11A Ownership for the purposes of certain Parts of Schedule 2
Migration Act 1958
134 Cancellation of business visas
ATTACHMENT A – Balance Sheets of Dubai Union
ATTACHMENT B – Funds transferred to Australia
APPLICATION FOR REVIEW
This is an application for review of a decision made by a delegate of the Minister for Immigration on 29 April 2019 to refuse to grant the visa applicant, Mr Ali Naghy NAGHY POUR (the Applicant) a Business Skills (Residence) (Class DF) visa under s.65 of the Migration Act 1958 (the Act).
The Applicant applied for the visa on 27 September 2017. Certain criteria must be satisfied during the two-year period ending immediately before the time of application, that is, 27 September 2015 to 26 September 2017 (the Application Period).
At the time of application, Class DF contained four subclasses: 890 (Business Owner), Subclass 891 (Investor), Subclass 892 (State/Territory Business Owner) and 893 (State/Territory Sponsored Investor). The Applicant in this case is seeking to satisfy the criteria for the grant of a Subclass 890 (State/Territory Business Owner) visa, as set out in Part 890 of Schedule 2 to the Migration Regulations 1994 (the Regulations).
The delegate in this case refused to grant the visa on the basis the Applicant did not satisfy the requirements of cl.890.212 of Schedule 2 to the Regulations because the business premises were held in his name personally rather than in the name of the entity operating the business and so the net business assets were insufficient by that exclusion.
The Applicant has five children who were secondary visa applicants on the visa application and who were offshore when the visa application was lodged as well as when the Department’s decision was made. The children were also offshore when the application for review was made. Therefore, they do not have any review rights and are not part of this review.
The Applicant was represented in relation to the review by Mr Antonio Lock of A. Lock & Associates[1] (the Representative).
[1] Migration Agent Registration Number: 9253181
In accordance with s.360(2)(a) of the Act, and for the following reasons, the Tribunal considered it should decide the review in the Applicant’s favour based on the material before it. It was therefore unnecessary to invite the applicants to appear before the Tribunal and the hearing, which had been set down for 17 December 2020, was vacated.
CONSIDERATION OF CLAIMS AND EVIDENCE
The issues in this case are who now owns the shares held by the Applicant’s late wife who predeceased the application and whether the business premises, owned by the Applicant and occupied by the entity which operates the business, can be included in the calculation of net business assets both of which are relevant to the consideration of cl.890.212 being the criterion on which the delegate refused the application.
In accordance with the President’s Direction[2], the Tribunal will only address those criteria on which the delegate made an adverse finding, being the satisfaction of cl 890.212. In addition, the Tribunal has also considered cl 890.211.
[2] Presidents Direction for Conducting Migration and Refugee Reviews dated 1 August 2018
Case law has established a business is not a legal entity but rather an enterprise or undertaking. It is therefore important for the Tribunal to identify the business to which the definition of main business must be applied. It is also important to note one business can be owned by multiple entities and conversely, multiple businesses can be owned by one entity.
Ownership interest in main business
Clause 890.211(1) requires the applicant to have had an ownership interest in one or more actively operating main businesses in Australia for at least two years immediately before the visa application was made and continued to have that interest at the time the visa application was made. No more than two businesses can be nominated for this purpose[3] and one or both businesses relied on to meet the time of application criterion can be relied on to meet the time of decision criterion.[4]
[3] reg 1.11(2)
[4] Yang v Minister for Immigration and Border Protection [2014] FCCA 1576
The business relied on by the applicant to satisfy these requirements is wholesale and retail sales of consumer products (the Business)[5] conducted by Dubai Union Pty Ltd ACN 162 035 369 (Dubai Union). The Business is conducted from premises at 190 Merrylands Road, Merrylands NSW 2160 (the Merrylands Road Property).
[5] Described by the Applicant in his statutory declaration of 25 September 2017 as: ‘trading in consumer products in Australia.’
Dubai Union was registered on 21 January 2013 in New South Wales (NSW). The Australian Securities & Investments Commission (ASIC) was notified the principal place of business of Dubai Union was changed to the Merrylands Road Property on 25 August 2014 and the registered office of the company was changed to that address from 19 February 2018.[6] The Tribunal notes the principal place of business was changed to the Merrylands Road Property before the commencement of the Application Period. The Applicant is the sole director and secretary of the company.
[6] ASIC historic search of Dubai Union conducted by the Tribunal on 6 October 2020
The Tribunal conducted an Australian Business Number (ABN) online search of the Australian Business Register (ABR) on 22 October 2020 and noted Dubai Union operates under the following names:
Business Name From Wowwowgold & Jewellery 14 October 2020 Wow Wow Supermarket 27 March 2020 2030 Tobacconist 15 April 2019 Wow Wow Discount 11 October 2017 Dubai Union Group 5 February 2013
According to a selection of photos provided with the application, the business was initially trading as ‘Economic Union’. That name does not show on the ABN lookup and a search of the business names register maintained by ASIC shows the name was registered on 31 January 2014 and subsequently cancelled. For convenience, the Business will be referred to in this decision by the name ‘Wow Wow Discount’ being the name most proximate to the time of application.
By conducting online searches with ASIC, the Tribunal notes all the above business names remain current and all but ‘Dubai Union Group’ show the principal place of business as the Merrylands Road Property. Dubai Union Group gives its principal place of business as 8 Rosehill Street, Parramatta NSW 2150, which was the registered office and principal place of business of Dubai Union from 21 January 2013 to 18 June 2013.
Even though many business names are used in Wow Wow Discount, the Tribunal finds there is only one ‘business’ being wholesale and retail sales of consumer products, that is, trading in consumer products in Australia, from the Merrylands Road Property.
Accordingly, the Tribunal must consider the nature of the applicant’s interest in this business, whether the business was actively operating and whether it met the definition of ‘main business’ in the period commencing two years immediately prior to the date of application and as at the date of application. It is beyond the scope of this decision for the Tribunal to also consider whether the applicant continues to satisfy cl.890.211(1) as at the date of this decision.
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;
including such 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)
In order to meet cl.890.211(1) the Tribunal must be satisfied the Applicant had an interest of this kind in the relevant business or businesses both at the time of making the application and during the Application Period.
Dubai Union has issued capital of 100 ordinary shares fully paid. The ASIC search conducted by the Tribunal on 6 October 2020 revealed those shares are recorded as held by:
Shareholder Number held Ali Naghy Naghy Pour 50 Donya Taghipoor 50 Total 100
The Tribunal notes Mrs Donya Taghipoor was the spouse of the Applicant and she died on 12 July 2016[9], that is, during the Application Period and before the application was lodged.
[9] Demise Certificate serial number: F/18-872682 issued on 2 November 2016 by The Islamic Republic of Iran, Ministry of Interior, National Organization for Civil Registration.
On 1 July 2019, the Representative provided a submission which stated, inter alia, ‘After his wife’s death, the applicant is the sole owner of his business and no one else.’ The Applicant provided a statutory declaration dated 25 September 2017 in which he stated: ‘Unfortunately, my wife died on 12 July 2016. I have since been the sole shareholder and director of the company.’
On 23 October 2020 the Tribunal wrote to the Applicant seeking an explanation as to how the shares held by the late Mrs Donya Taghipoor had been dealt with given the comments made by the Applicant in 2017 and the Representative in 2019, and the information revealed by the ASIC Search. The Applicant provided a statutory declaration dated 26 November 2020, which was received with other documents from the Representative on 29 October 2020 (the Applicant’s 2020 Statutory Declaration). The Tribunal assumes the date on the Applicant’s 2020 Statutory Declaration is incorrect and should be 26 October 2020. The Representative provided a submission dated 29 October 2020 (the Representative’s 2020 Submission) together with other documents including:
(a)A copy of the Demise Certificate for the late Mrs Donya Taghipoor (previously provided);
(b)A declaration dated 29 October 2020 from a Mr Thomas Chiu, who describes himself as a legal practitioner;
(c)Title search dated 27 October 2020 for Lot A in deposited plan 384221 at Merrylands showing the Applicant as the owner and the ANZ Bank as mortgagee. This is the Merrylands Road Property as the title reference agrees with the copy of the contract for the purchase of that property; and
(d)A compilation of the financial statements for Dubai Union for the 2020 financial year, copies of BAS for the period 1 July 2019 to 30 September 2020, photos said to be of the Merrylands Road Property and the Applicant working in it and a copy of a Record of Registration for Business Name dated 14 October 2020.
The Applicant’s 2020 Statutory Declaration and the Representative’s 2020 Submission confirm the date of death for the late Mrs Donya Taghipoor, who died intestate and no action has been taken by the Applicant to seek Letters of Administration, or their equivalent, either in Australia or Iran in order to deal with the shares held by the late Mrs Donya Taghipoor.
Curiously, the Representative’s 2020 Submission states more than once the shares held by the late Mrs Donya Taghipoor have no value, yet the business operated by Dubai Union is said to have a value required to be counted for the purpose of satisfying cl.890.212. The value of the business assets represented by the net assets of Dubai Union is discussed later in this decision, see paragraph [86]. The Representative’s 2020 Submission also makes an irrelevant reference to a media report in Australia concerning the chairman of ASIC.
Notwithstanding the failure of the Applicant to deal with the assets of his late spouse and to notify ASIC of the transfer of his late wife’s shares in Dubai Union, the Tribunal finds the Applicant holds an ownership interest in the Business throughout the Application Period and as at the date of this decision because the Business, Wow Wow Discount, is conducted by Dubai Union and the Applicant has been a shareholder in Dubai Union continuously since 21 January 2013.
Specifically, the Tribunal finds the ownership of Dubai Union to be as follows:
Date Applicant Donya Taghipoor Estate of Mrs Donya Taghipoor Total 27 September 2015[10] 50 50 0 100 12 July 2016[11] 50 0 50 100 27 September 2017[12] 50 0 50 100 [10] Commencement of the Application Period.
[11] Date of death of Mrs Donya Taghipoor.
[12] Date of Application.
The Tribunal finds the Applicant has held a 50% interest in Dubai Union throughout the Application period and as at the date of application and combined with his spouse held 100% of Dubai Union until 11 July 2016. Thereafter the Applicant does not have a spouse and his shareholding remains at 50%.
Accordingly, the Tribunal is satisfied the Applicant did have and does have an ownership interest in the nominated business at all relevant points in time.
Was each business relied on actively operating at all relevant times?
In order to meet cl.890.211(1) the Tribunal must be satisfied the relevant business or businesses were actively operating both at the time of making the visa application and during the two years immediately before.
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.[13]
[13] Shahpari v Minister for Border Protection [2016] FCCA 513 at [71]
The Applicant provided a copy of audited financial statements for Dubai Union[14], the operator of Wow Wow Discount, for the year ended 30 June 2017 with comparatives for the year ended 30 June 2016, which covers the period 1 July 2015 to 30 June 2017.
[14] Audit report of Peter Tsang of Peter Tsang & Co dated 8 August 2017.
Those financial statements reveal the following:
2017 2016 Sales 358,696 463,985 Cost of sales 86,501 208,478 Gross profit 272,195 255,507 Other income 2,838 11,906 Total income 275,033 267,413 Expenses 166,605 179,824 Profit before tax 108,427 87,589 Income tax expense 19,266 0 Profit after tax $89,161 $87,589
During the 2016 and 2017 financial years, Wow Wow Discount had combined sales of $822,681 (average $411,341) and generated combined net profit after tax of $176,750 (average $88,375). The statutory declaration of the Applicant dated 25 September 2017 indicates the Business commenced operations on 28 August 2014 and remained so at least to the time of application. It is apparent to the Tribunal the Business, that is, Wow Wow Discount, is open to the public as evidenced by the photos provided with the application.
Accordingly, the Tribunal is satisfied the relevant business, Wow Wow Discount, was actively operating both at the time of making the visa application and during the Application Period because it had arm’s length customers, made sales and generated after tax profits.
Does each business relied on satisfy the definition of ‘main business’, at all relevant points in time?
In order to satisfy the requirements of cl.890.211(1), the business or businesses relied on by the applicant must meet the definition of ‘main business’, at the time of application and during the Application Period. 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.[15] If a beneficial interest is relied on for these purposes, certain evidentiary requirements must also be met.[16] These provisions are set out in full in the attachment to this decision.
[15] r.1.03
[16] 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.[17]
[17] r.1.03.
Regulation 1.11(1)(c) states 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 is or was (emphasis added) at a certain level. The turnover of Wow Wow Discount in the 2017 financial year was less than $400,000 so the ownership interest had to be at least 51% and that was achieved from the commencement of the Application Period to 11 July 2016 because the Applicant has held a 50% interest in Dubai Union since it was established and until his spouse died on 12 July 2016, together they held 100% of Dubai Union. Accordingly, the Tribunal finds the first and third elements of the definition of main business have been satisfied.
In his statutory declaration dated 25 September 2017, the Applicant provided a list of his duties in the business including carrying out the duties and responsibilities of a director, opening and closing the business premises, attending to all banking, purchasing, merchandising, budgeting and customer relations.
The Tribunal checked the movement records for the Applicant during the Application Period and found he had been offshore for a total of 279 days between 27 September 2015 and 4 August 2016, which equates to 38% of his time during the Application Period. Clearly, the Applicant could not carry out the duties of opening and closing the business premises, attending to all banking, purchasing, merchandising and customer relations while he was offshore, because they rely on a physical presence at the business premises. He would have to rely on local employees to carry out those tasks albeit under his instruction. The Tribunal considers he would be able to attend to budgeting and most of his fiduciary duties as a director whilst offshore.
In response to a letter from the Tribunal, the Applicant provided a statutory declaration dated 30 November 2020 in which he states his extended absence from Australia during the Application Period was due to the ill health and eventual death of his wife who died in Iran on 12 July 2016. The Tribunal was fully aware of the serious illness and death of the late Mrs Donya Taghipoor from numerous earlier submissions.
The issue for the Tribunal in writing to the Applicant was how he was able to maintain 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 as required by the second element of the main business definition.
In the Applicant’s statutory declaration dated 30 November 2020 he states in paragraph 2: ‘I declared that my absence during the period is due to compelling and compassionate circumstances. Before she passed away on 12th July, 2016, the trips were essential to meet the need for me to accompany and take care of my wife for her cancer treatment in Iran, as well as for the sake of my children’s welfare.’
He goes on to say in paragraph 3: ‘During my absence from Australia, I kept in daily contact through digital communications (emails, phone calls and Wechat etc.) with my employee and related parties, including but not limited to my accountant, suppliers and relevant authorities.’
The Representative provided a submission dated 1 December 2020 in which he reiterates the serious illness and eventual death of the Applicant’s wife in Iran as the reason for the Applicant’s extended absence from Australia during the Application Period. Attached to this submission is an 11 page document, which the Representative asserts is an extract of messages exchanged between the applicant and an employee using the WeChat messaging system.
The extracts are time stamped but otherwise undated and from a Vodafone Australia mobile telephone number ending 4000. The holder of that telephone number has not been identified and there is a reference to a person called ‘Sumar’, who was also not identified. The Tribunal accepts this extract is a record of WeChat communication between the Applicant and an employee because the Representative says so in his submission of 1 December 2020. However, as the extract is undated no weight can be placed on it for the purpose of this case.
Further, no evidence has been provided about digital communication with the Applicant’s accountant, suppliers and relevant authorities (emphasis added) as stated by the Applicant in his statutory declaration of 30 November 2020. No copies of e-mail exchanges or telephone records were provided.
Ms Mingxiang Xia provided a statutory declaration dated 30 November 2020, in which she states she was employed as a personal assistant and salesperson to Mr Ali Naghy Naghy Pour (the Applicant), who she refers to as Mr Pour, during the period July 2013 until July 2017.
She states in the third paragraph: ‘Since then, I am acting upon any decision made by Mr Pour in relation to running the shop.’ She continues in paragraph 4 to say: ‘I am not legally liable for anything arisen out of decision made by the company’s directors. In this respect, I have no role in availing myself as a manager of the business.’ Finally, in paragraph 5 she states:
‘In summary, my role is to assist Mr Pour in communicating to all parties concerned and on a day-to-day basis, I need to report to Mr Pour for any matters regarding shops issues and relayed all his decisions to other staff. I only act as a supporting role. I have to call him at overseas in his physical absence.’
Returning to the second element of the main business definition, the Applicant must maintain or have maintained (emphasis added) direct and continuous involvement in management of the business, Wow Wow Discount, from day to day and in making decisions affecting the overall direction and performance of the business.
The Applicant is the sole director of Dubai Union, the operator of Wow Wow Discount, and whilst the business has employees, for example Ms Mingxiang Xia, to assist the Applicant to carry out his duties, the evidence to support his maintaining direct and continuous involvement in the day-to-day management of the business, during his extended absences from Australia attending to his wife and family during the time of her serious illness, is insufficient to make a finding the Applicant effectively did so.
However, it is clear to the Tribunal the Applicant did maintain 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 after his return to Australia on 4 August 2016, which is prior to the time of application.
The Tribunal has already found Dubai Union was actively operating the Business, Wow Wow Discount, during the Application Period, see paragraph [36]. The Tribunal finds the Business was a qualifying business both at the time of making the visa application and during the Application Period because it provided wholesale and retail sales of consumer products to the public and there is no evidence it had been operated primarily or substantially for the purpose of speculative or passive investment such as property rental.
Accordingly, the Tribunal is satisfied the nominated business does meets the definition of main business at all relevant points in time.
Given the findings above, the Tribunal is satisfied cl.890.211(1) is met. The Tribunal has also considered cl.890.211(2).
Australian Business Number and Business Activity Statements
Clause 890.211(2) must be satisfied as at the time of visa application. It requires for each business to which cl.890.211(1) applies:
(a)an Australian Business Number (ABN) has been obtained, and
(b)all Business Activity Statements (BAS) required by the Australian Taxation Office (ATO) for the two years immediately before the visa application was made have been submitted to the ATO and have been included in the application.
As the date of application was 27 September 2017, the BAS for the two years immediately before the visa application are the eight quarters from period 1 July 2015 to 30 June 2017.
Having regard to the above findings, the relevant business is Wow Wow Discount conducted by Dubai Union, see paragraphs [12] and [15]. The Tribunal checked the ABR on 22 October 2020 and confirmed the ABN for Dubai Union Pty Ltd is 81 162 035 369, which remains current as does the Goods & Services Tax (GST) registration both of which apply from 21 January 2013 when the company was established.
BAS for Dubai Union were submitted by the Applicant and it is evident to the Tribunal they were downloaded from the ATO confirming they had been lodged with the ATO. Export sales are reported only for the quarter ended 30 September 2015, which is consistent with the nature of the business.
The sales, as shown on the BAS, are as follows:
Quarter ended
Amount
(excl. GST)
30 September 2015
89,814
31 December 2015
80,554
31 March 2016
130,075
30 June 2016
129,062
Total year ended 30 June 2016
$429,505
30 September 2016
124,789
31 December 2016
123,479
31 March 2017
44,194
30 June 2017
63,053
Total year ended 30 June 2017
$355,515
Sales for the year ended 30 June 2017 were $358,696, see paragraph [34], whereas the sales excluding GST as set out above for the four quarters of the 2017 financial year are $355,515. The Tribunal understands the BAS are prepared on a cash basis whereas the financial statements are prepared on an accruals basis and as a result these two amounts are unlikely to ever be the same due to timing differences. The Tribunal is satisfied the correlation between these two amounts is sufficiently close to be accepted.
The Tribunal finds all Business Activity Statements required by the ATO for the two years immediately before the visa application were submitted to the ATO and were included in the application because they are included in the department’s file provided to the Tribunal and there is no evidence before the Tribunal to indicate they were not provided as part of the application.
Given the findings above, the Tribunal is satisfied cl.890.211(2) is met. The Tribunal now considers cl.890.212, being the criterion on which the application was refused.
Requirements relating to applicant’s assets in the main business
Clause 890.212 requires the Applicant to meet certain requirements relating to the assets of his main business, remembering a business is an enterprise separate from the entity which operates it. Specifically, at the time of visa application and in the 12 months immediately before the time of application, the total value of the net assets in the main business(es) in Australia of the Applicant, or the Applicant’s spouse or de facto partner, or the Applicant and his spouse or de facto partner together have a net value of at least A$100,000. Further, these assets must have been lawfully acquired.
As mentioned above, the delegate refused the application because the net assets of Dubai Union were insufficient to meet the required threshold. The Applicant submitted the requirements concerning net assets in the main business, Wow Wow Discount, are met by his interest in Dubai Union plus his ownership of the Merrylands Road Property even though that property is owned by the Applicant personally and not by Dubai Union.
The Merrylands Road Property
Dubai Union conducts the business from the Merrylands Road Property, which is owned by the Applicant.
The Applicant provided a copy of a purchase contract for the Merrylands Road Property. The contract is dated 24 October 2013 and reveals the purchaser was the Applicant alone and the purchase price was $1,245,000. According to the settlement statement accompanying the purchase contract, settlement occurred on 21 January 2014. The purchase price was funded by way of an interest only loan from ANZ Bank of $780,000 with the balance provided by the Applicant being $123,500 drawn as a personal cheque by the Applicant on 24 October 2013 and $351,768.48 drawn by the ANZ Bank on 21 January 2014 to complete settlement.[18]
[18] Representative’s submission dated 23 November 2020.
The ANZ loan is confirmed by a copy of the letter of offer from the bank dated 28 August 2013 and statements for ANZ account number ending 7178 (ANZ #7178). $465,000, viz, $1,245,000 less $780,000, represents the net equity of the Applicant in the Merrylands Road Property at the time of acquisition.
No valuation of the Merrylands Road Property was provided with the application. The original purchase price in 2013 was $1,245,000 as discussed above. The Tribunal is aware property prices generally fell as a result of the Global Financial Crisis (GFC) however that did not occur until 2018 and the Tribunal is considering the value of the property at the time of the application on 27 September 2017. It is likely the value of the property increased during the period October 2013 to September 2017 before possibly falling sometime after 2018 although any such fall in value is not relevant to this decision. The Applicant has not sought to rely on an increase in the value of the property beyond the purchase price to him in 2013 and the Tribunal accepts that value as a reasonable estimate of its value at the time of application resulting in net equity of $465,000.
With his application, the Applicant provided various documents concerning the Merrylands Road Property including a copy of the construction contract with Good Fortune Construction dated 20 February 2014, copies of cheques payable to the contractor together with invoices for items purchased directly by the Applicant, a construction certificate issued on 27 March 2014 by NSW Environmental & Planning Services Department and a copy of the plans for the construction certified by Holroyd City Council, which show there is no residential component to the property. The Tribunal finds the Merrylands Road Property is wholly business premises.
The delegate refused the application on the basis the net business assets of Dubai Union were insufficient and could not include the value of the Merrylands Road Property as it is owned by the Applicant personally. Relevantly, cl.890.212 requires the net assets of the applicant in the main business (emphasis added) in Australia to reach A$100,000. In calculating the value of an applicant’s assets in a business, the Tribunal should not restrict itself to considering assets owned by the entity which operates the business. In deciding whether an asset owned by the Applicant is an asset in the business, the Tribunal has considered whether the asset is being used in the business.
In Cheung[19] the Court found the property of the applicant’s spouse was being used in the business as it was used to secure an overdraft for the business, letters of credit and other banking facilities for the business’s trading activities. In this case, the Merrylands Road Property, being the premises from which the business is conducted, is being used exclusively in the business.
[19] Cheung v MIMIA (2005) 143 FCR 117.
The Tribunal finds the Merrylands Road Property, at a value of $465,000 is a business asset for the purpose of cl.890.212 because it is owned by the Applicant and used exclusively in the business conducted by Dubai Union.
Dubai Union net assets
The Applicant provided a copy of the financial statements for Dubai Union for the year ended 30 June 2017 with comparative figures for the year ended 30 June 2016, prepared by Bill Li & Co Chartered Accountants and audited by Peter Tsang & Co. The financial statements, as at 30 June 2016 and 30 June 2017, are reproduced at [ATTACHMENT A – Balance Sheets of Dubai Union].
The reported net assets of Dubai Union as at 30 June 2016 are $(34,831) and as at 30 June 2017 are $24,330. Other than the loan from the Applicant and the Intangible Assets, the Tribunal is satisfied the items on the balance sheets can be taken at face value as they are considered normal for the type of business conducted by Dubai Union.
The Intangible Assets of $1,696 represent formation expenses and costs of patents and trademarks, which the Tribunal considers have little or no realisable value and accordingly have been disregarded in the calculation of net business assets.
The Tribunal adopts a conservative approach to the valuation of privately held entities. Related party loans are generally disregarded unless they are documented on commercial terms, including security, in a legally binding loan agreement.
Departmental policy
Clause 890.212 anticipates the financial statements provided to test this criterion will be for the year ended on the application date (27 September 2017 in this case) with comparative figures. Under departmental policy, immediately before means any date in the three-month period immediately before the visa application was made. There are audited financial statements before the Tribunal for the year ended 30 June 2017, with comparatives for the year ended 30 June 2016, which end three months before the application date.
Departmental policy regarding net business assets seeks to establish the Applicant has a record of financial commitment to business through personal financial involvement and exposure to risk by investing a substantial amount of money sourced from their own funds. Whilst departmental policy is not the law or the regulations, it can be a useful guide in determining net business assets, unless the circumstances of the case dictate otherwise.
The Tribunal has assessed the adjusted net assets of Dubai Union as at 30 June 2016 and 30 June 2017, see paragraph [87], is comfortable to make its decision accepting departmental policy in this case and has based its assessment of cl 890.212, in respect of Dubai Union, on the financial statements for the year ended 30 June 2017.
According to departmental policy, the steps to determine net business assets are:
(a)From the reported financial statements, establish the net assets, which equals net equity, then
(b)Add back any unsecured related party loans, then
(c)Calculate the proportionate share of the adjusted net assets, then
(d)Add the balance of any loans advanced to the business by the Applicant (or deduct funds loaned to the Applicant by the business) net of any loans the Applicant may have taken out to finance their investment in the business.
Adjusted net business assets
Adjusting the reported net business assets for unsecured related party loans and intangible assets results in the following net asset position for the Applicant once the Merrylands Road Property is included:
30/06/2016 30/06/2017 Reported net assets of Dubai Union 24,331 (34,830) Add back: Director loan 43,478 203,963 Deduct: Intangible assets (1,696) (1,696) Adjusted net assets of Dubai Union 66,113 202,267 Applicants’ share (50%) 33,057 83,718 Add: Director loan 43,478 203,963 Add: The Merrylands Road Property 465,000 465,000 Applicant’s net business assets $541,535 $752,681
Assets must have been lawfully acquired
The Applicant provided copies of advices received from ANZ Bank for a total of A$1,560,756 transferred from Dubai, United Arab Emirates to Australia between 21 February 2013 and 23 June 2015 across 31 individual transactions, see ATTACHMENT B – Funds transferred to Australia. The ordering customer is shown as the Applicant and the account credited is that of the Applicant however no explanation was provided as to the source of those funds.
On 9 November 2020, the Tribunal wrote to the Applicant requesting an explanation of the source of those funds and why it was necessary to transfer them over a period of 16 months by way of 31 transactions. The Applicant responded with a statutory declaration dated 18 November 2020 and a submission by the Representative dated 23 November 2020 together with various other documents.
The Applicant’s evidence is he accumulated his wealth in Dubai as a shareholder in a company called Noor Al Ahli General Trading Group (L.L.C.) (the Dubai Business).
Amongst the documents supporting his statutory declaration is a copy of the signed audited financial statements for the Dubai Business for the year ended 31 March 2010 with comparative figures for the year ended 31 March 2009 and for the year ended 31 March 2011 with comparative figures for the year ended 31 March 2010.
The audit of the financial statements was conducted by Howarth Mak, which the Tribunal understands is the Dubai office of Crowe Howarth International, an international accounting and consulting firm. Accordingly, the Tribunal is comfortable with the reliability of these audited financial statements.
The financial statements for both years, 2011 and 2010, confirm the Applicant was a 43% shareholder in the Dubai Business, which has paid up share capital of AED3,000,000. As at 31 March 2011, the Tribunal estimates AED3,000,000 to be approximately AUD1,200,000.
The Applicant provided a statutory declaration dated 18 November 2020 in which he confirms his business background as the source of the funds he brought to Australia, which is discussed above, and as to why it was necessary to effect 31 individual transfers he said:
‘I declare and confirm that “personal convenience” was the sole and exclusive reason for me to sending them separately. In doing so, it would facilitate me to order these remittances online whenever I need to access to my funds.’
The Tribunal finds the assets of the Applicant have been lawfully acquired.
Given the findings above, the Tribunal is satisfied cl.890.212 is met. The appropriate course is to remit the matter to the Minister to consider the remaining criteria for the visa.
DECISION
The Tribunal remits the application for a Business Skills (Residence) (Class DF) visa for reconsideration, with the direction the visa applicant meets the following criteria for a Subclass 890 (Business Owner) visa:
· cl.890.211 and cl.890.212 of Schedule 2 to the Regulations.
ATTACHMENT A - Legislation
Migration Regulations 1994
1.03 Definitions
In these Regulations, unless the contrary intention appears:
…
ownership interest has the meaning given to it in subsection 134(10) of the Act.
…
qualifying business means an enterprise that:
(a) is 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
(b)is not operated primarily or substantially for the purpose of speculative or passive investment.
…
1.11 Main business
(1)For the purposes of these Regulations and subject to subregulation (2), a business is a main business in relation to an applicant for a visa if:
(a)the applicant has, or has had, an ownership interest in the business; and
(b)the applicant maintains, or 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; and
(c)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 is or was:
(i)if the business is operated by a publicly listed company—at least 10% of the total value of the business; or
(ii)if:
(A)the business is not operated by a publicly listed company; and
(B)the annual turnover of the business is at least AUD400 000;
at least 30% of the total value of the business; or
(iii)if:
(A)the business is not operated by a publicly listed company; and
(B)the annual turnover of the business is less than AUD400 000;
at least 51% of the total value of the business; and
(d)the business is a qualifying business.
(2)If an applicant has, or has had, an ownership interest in more than 1 qualifying business that would, except for this subregulation, be a main business in relation to the applicant, the applicant must not nominate more than 2 of those qualifying businesses as main businesses.
1.11A Ownership for the purposes of certain Parts of Schedule 2
(1)Subject to subregulation (4), for Parts 132, 188, 888, 890, 891, 890 and 893 of Schedule 2, ownership by an applicant, or the applicant’s spouse or de facto partner, of an asset, an eligible investment or an ownership interest, includes beneficial ownership only if the beneficial ownership is evidenced in accordance with subregulation (2).
(2)To evidence beneficial ownership of an asset, eligible investment or ownership interest, the applicant must show to the Minister:
(a)a trust instrument; or
(b)a contract; or
(c)any other document capable of being used to enforce the rights of the applicant, or the applicant’s spouse or de facto partner, as the case requires, in relation to the asset, eligible investment or ownership interest;
stamped or registered by an appropriate authority under the law of the jurisdiction where the asset, eligible investment or ownership interest is located.
(3)A document shown under subregulation (2) does not evidence beneficial ownership, for subregulation (1), for any period earlier than the date of registration or stamping by the appropriate authority.
(4)Beneficial ownership is not required to be evidenced in accordance with subregulation (2) if the person who has legal ownership of the asset, eligible investment or ownership interest in relation to which the applicant, or the applicant’s spouse or de facto partner, has beneficial ownership:
(a)is a dependent child of the applicant; and
(b)made a combined application with the applicant; and
(c)has not reached the age at which, in the jurisdiction where the asset, eligible investment or ownership interest is located, he or she can claim the benefits of ownership of the asset, eligible investment or ownership interest.
Migration Act 1958
134 Cancellation of business visas
….
In this section:
….
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;
including such an interest held indirectly through one or more interposed companies, partnerships or trusts.
ATTACHMENT A – Balance Sheets of Dubai Union
| 30/06/2017 | 30/06/2016 | |
| Current Assets | ||
| Cash at bank and on hand | 213 | 35,510 |
| Stock on hand | 53,800 | 91,717 |
| Other debtors | 911 | 617 |
| 54,924 | 127,844 | |
| Non-Current Assets | ||
| Property, plant and equipment at WDV[20] | 66,570 | 100,949 |
| Intangible assets | 1,696 | 1,696 |
| 68,266 | 102,645 | |
| Total Assets | 123,190 | 230,489 |
| Current Liabilities | ||
| Bank overdraft | 6,630 | 0 |
| Trade and other creditors | 38,154 | 38,587 |
| Accruals | 1,926 | 8,789 |
| GST payable | 1 | 11,226 |
| PAYG payable | 0 | 2,754 |
| Income tax payable | 8,670 | 0 |
| Loan from Director | 43,478 | 203,963 |
| 98,859 | 265,319 | |
| Net Assets | $24,331 | $(34,830) |
| Equity | ||
| Issued capital | 100 | 100 |
| Retained earnings | 24,231 | (34,930) |
| Net Equity | $24,331 | $(34,830) |
[20] Written down value (WDV), that is, after depreciation has been charged.
ATTACHMENT B – Funds transferred to Australia
Date Amount A$ 21 February 2013 5,476.00 6 March 2013 59,976.00 18 March 2013 199,976.00 18 March 2013 89,976.00 27 March 2013 24,976.00 12 April 2013 9,976.00 3 May 2013 29,976.00 13 May 2013 49,976.00 25 June 2013 19,976.00 30 July 2013 36,976.00 2 August 2013 69,976.00 6 August 2013 49,976.00 8 August 2013 89,976.00 29 August 2013 69,976.00 17 September 2013 149,976.00 20 September 2013 99,976.00 30 September 2013 59,976.00 29 November 2013 17,976.00 22 January 2014 19,976.00 5 February 2014 14,976.00 13 February 2014 16,976.00 19 March 2014 64,976.00 4 June 2014 24,976.00 25 July 2014 39,976.00 31 October 2014 33,976.00 2 December 2014 39,976.00 29 December 2014 29,976.00 13 January 2015 29,976.00 24 February 2015 29,976.00 26 May 2015 49,976.00 23 June 2015 29,976.00 Total $1,560,756.00
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