Shi (Migration)

[2022] AATA 3479

Shi (Migration) [2022] AATA 3479 (9 September 2022)

DECISION RECORD

DIVISION:Migration & Refugee Division

APPLICANTS:  Ms Xiuling Shi
Mr Zhiqiang He
Mr Angel He
Miss Jiawen He

REPRESENTATIVE:  Ms Karen Wong (MARN: 0213269)

CASE NUMBER:  1932386

HOME AFFAIRS REFERENCE(S): BCC2017/3624523 BCC2017/3785485

MEMBER:Robyn Anderson

DATE:9 September 2022

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 Migration Regulations 1994 and

· Cl 892.221(b) of Schedule 2 to the Migration Regulations 1994.

Statement made on 9 September 2022 at 11.10am

CATCHWORDS

MIGRATION – Business Skills (Residence) (Class DF) visa – Subclass 892 (State/Territory Business Owner) visa – loans from directors account – assets were lawfully acquired – ownership interest in a main business – direct and continuous involvement in management of the business – provision of goods and/or services – value of assets and liabilities – business and personal assets – interest in residential property – decision under review remitted

LEGISLATION

Migration Act 1958, ss 65, 134
Migration Regulations 1994, Schedule 2, cls 892.212, 892.221; rr 1.03, 1.11

CASES

Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60

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 1 November 2019 to refuse to grant the visa applicant a Business Skills (Residence) (Class DF) Subclass 892 visa under s 65 of the Migration Act 1958 (Cth) (the Act).

2. The applicants were granted a Subclass 163 -- State/Territory Sponsored Business Owner (Provisional) visa on 4 June 2013.  The visa applicants applied for the Subclass 892 permanent visa on 4 October 2017.

3. The applicants in this case are seeking to satisfy the criteria 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 satisfy the secondary criteria set out in Subdivision 892.3.

4. The delegate in this case refused to grant the visas on the basis that the first named visa applicant did not satisfy the requirements of cl 892.212 of Schedule 2 to the Regulations as two of the three criteria were not satisfied. The central issue was in relation to the treatment of the “Loans from directors” account.

5. The applicants were represented in relation to the review.  A detailed submission from the visa applicants’ legal representative was received by the Tribunal on 16 March 2020. The matter was constituted to a Tribunal Member on 30 March 2022.  A further submission and additional evidence were provided to the Tribunal on 8 July 2022.

6. The first-named applicant, Ms Shi, appeared before the Tribunal on 21 July 2022 via video conference and gave evidence and presented arguments on affirmation. The Tribunal hearing was conducted with the assistance of an interpreter in the Mandarin and English languages. The applicants’ representative also appeared by video conference.

7. Ms Shi confirmed that she was seeking to meet cl 892.212 of Schedule 2 to the Regulations on the basis of meeting cl 892.212(b) and cl 892.212(c). The Tribunal highlighted at hearing that if relying on cl 892.212(b) as one of the two requirements to meet cl 892.212 of Schedule 2 to the Regulations, the requirement to meet cl.892.212(b) must also be met at the time of decision (cl 892.221(b) of Schedule 2 to the Regulations).

8. The Tribunal deferred making a decision in this matter to allow time for the applicants to provide further supporting evidence in respect of transactions in the “Loans from directors” general ledger account, supporting evidence that the assets were lawfully acquired and that cl 892.221(b) was also met at the time of decision.

9. The Tribunal received a further submission and additional information on 11 August 2022. Ms Wong submitted that the applicants meet cl 892.212 of Schedule 2 to the Regulations on the basis of cl 892.212(b) and cl 892.212(c), in addition to also meeting cl 892.221(b) of Schedule 2 to the Regulations (being the same criteria as cl 892.212(b) but at the time of decision). For the following reasons, the Tribunal has decided that the matter should be remitted for reconsideration.

   CONSIDERATION OF CLAIMS AND EVIDENCE

10. Ms Shi gave oral evidence that she first visited her older siblings in Australia as a tourist in 2008.  It was then that she commenced thinking about migrating to Australia.  At the time she and her husband were operating a supermarket in Argentina while their children remained in China with their grandparents.  After 13 years in business, they sold the supermarket and returned to China in October 2013 to care for their elderly and ailing parents.   

11. According to departmental records, the visa applicants arrived in Australia in March 2014.  Ms Shi explained that due to the passing of her mother she and her husband returned to China a few weeks later, returning to Australia in April 2014 and since remaining.

12. As noted above, the issue in the present case is whether the requirements of cl 892.212 of Schedule 2 to the Regulations are met by Ms Shi.

13. There is no evidence before the Tribunal that the appropriate regional authority has determined that there are exceptional circumstances in this case. Therefore, cl 892.212 of Schedule 2 to the Regulations requires the applicant, the applicant’s spouse, or the applicant and her 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), cl 892.212(b) or cl 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 Ms Shi lodged her application on 4 October 2017, the relevant period is from 4 October 2016 to 3 October 2017.

14. The meaning of “main business” is set out in r.1.11(1) of the Regulations (as defined in r.1.03). Ms Shi nominated a food, grocery and liquor retailing business (the Business) as the main business in her application, operating through Zhi Xue Pty Ltd (the Company).  The four criteria are not mutually exclusive and must all be met before the Business can be considered as the “main business”. 

15. The first of the criteria under r.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”.

16. ASIC records confirm that Ms Shi is and has always been the sole director and shareholder of the Company since incorporation on 2 August 2014.  The trading name of the Business operating through the Company is recorded by ASIC as Foodmarket Cellars – Noble Park.  As such, 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.

18. Ms Shi gave oral evidence that she and her husband work together in the Business on a full-time basis, the food store is open seven days a week from 8.20am to 8.30pm. They are both involved in purchasing, paying invoices, performing stocktaking duties and liaising with the accountant on a quarterly basis. However, it is Ms Shi who records the income and expense summaries and records and maintains the stocktake information for the accountant. As she is not so computer literate, she prefers to do things manually, preparing a basic worksheet on the computer to combine cash and bank transactions for the benefit of the accountant.

19. In response to a question from the tribunal, Ms Shi stated that since purchasing the business in June 2015, the business has increased the level of stock available for sale which in turn has increased the revenue. 

20. According to departmental records it is evident that it is Ms Shi who has signed important documents such as the sale of business contract and the lease agreement on 2 March 2015 and 28 May 2015 respectively in her capacity as director of the Company.  In addition, it is the signature of Ms Shi on various equipment leases and cheques.

21. Based on the evidence before it, the Tribunal accepts that Ms Shi 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 operations of the Business, albeit assisted by her husband.  Therefore, the second criterion in r.1.11(1)(b) is met. 

22. 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 AUD400,000 and at least 51% if the annual turnover is less than AUD400,000.  In this case, as Ms Shi has been the sole shareholder from the outset, the third criterion in r.1.11(1)(c) is clearly met, regardless of the turnover.

23. Finally, the Business must be a qualifying business.  Qualifying business is defined at 1.03 of the Regulations to mean “an enterprise that is operated for the purpose of making profit through the provision of goods and/or 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.”  There is no question that the Business provides goods and services to the public and continues to do so.

24. Based on the annual financial statements, the Business has made a profit in the years ending 30 June 2016 and 30 June 2017 with a small loss in the first year of operation ending 30 June 2015.  While the profit and loss statement as at 30 September 2017 records a small loss, this is largely on account of the immediate write-off of more than $30,000 of new equipment purchases.  Retained profits have increased from 30 June 2017 to 30 June 2021 by more than $93,000. 

25. Departmental policy in Procedures Advice Manual, version 3 (PAM3), to which the Tribunal may have regard in appropriate cases, states that it is not necessary for a business to have operated at a profit to be considered a qualifying business, only that it is being operated for the purpose of making a profit. While the Tribunal is not bound by policy, in Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60 the Full Federal Court held that a tribunal should take into account relevant government policy which is not inconsistent with the provisions or objects of the legislation. In particular, the courts have held that the PAM3 guidelines constitute no more than an administrative advisory guide to decision-makers in relation to the application of the Act and Regulations, and that they are incapable of being elevated into legally necessary or relevant considerations.

26. In this case the Tribunal regards the policy as a useful guide to applying the legislation. The Tribunal is satisfied that the Business has been operated for the purpose of making a profit and continues as such. 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 operated for the purpose of making profit through the provision of goods and/or 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.  Accordingly, it operates a qualifying business, thereby satisfying the criterion in r.1.11(1)(d).

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

    Net business assets – cl.892.212(c)

28. Clause 892.212(c) of Schedule 2 to the Regulations requires that the applicant, the applicant’s spouse, or the applicant and his spouse together, held assets in the main 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.

29. In relation to the calculation of the net business assets, or equity for a privately incorporated business such as the Business, PAM 3 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 “Loans from directors” account.

30. The applicant relied on financial statements as at 30 September 2016 and 30 September 2017, as provided to the Department.  Under policy, the term ‘immediately before the application is made’ is interpreted as the three-month period prior to the date the visa application was received by the Department. While the Tribunal is not bound by policy, given that the application date was 4 October 2017, the Tribunal was satisfied that this was an appropriate period to consider and examined the relevant financial statements in respect of the Business, which recorded net negative assets of AUD13,193 at 30 September 2016 and net assets of AUD26,596 at 30 September 2017.   

31. Policy allows loans by directors 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. The Tribunal considers this to be consistent with the intention of the legislation and therefore the verified “Loans from directors” can be added to the calculation of the net assets of the business.

32. As discussed at hearing, the items in the balance sheet were largely unremarkable and were supported by bank statements, rental bond evidence and asset purchase invoices.  The contract of sale in respect of the business in June 2015 did not specify what the purchase price of AUD125,000 represented.  Additional stock purchased was valued at AUD40,000.  It was evident that none of the purchase price was allocated as equipment.  Consequently, all of the purchase price was appropriately recorded as goodwill.  The Tribunal noted that due to the immediate write-off of the newly purchased equipment in the amount of AUD30,045, the plant and equipment is undervalued in the balance sheet as at 30 September 2016 and 30 September 2017.  As can be seen below, this has no impact on the overall findings.

33. The Tribunal discussed the various transactions in the “Loan from directors” general ledger account, which totalled AUD298,965 at 30 June 2016, 30 September 2016, 30 June 2017 and 30 September 2017.  The deposit transactions are as set out in the table below.

Date	Deposit Amount AUD	Source
08/10/14	115,112.23	Citibank – Ms Shi
20/10/14	110,000.00	Citibank – Ms Shi
04/06/15	48,000.00	Bank of China – Ms Shi
13/11/15	8,000.00	CBA – Ms Shi and Mr He
29/06/16	26,000	CBA – Ms Shi and Mr He

1. Ms Shi gave oral evidence that the AUD115,112 deposit to the Business initially came from funds transferred to her Citibank account from Argentina.  Evidence provided after the hearing supported the oral evidence of Ms Shi, including the statements recording the withdrawal of $115,112,23 from Ms Shi’s Citibank account on 7 October 2014 and the corresponding deposit into the CBA account of the Business on 8 October 2014.  The Tribunal accepts that the transfer is as recorded in the “Loans from directors” general ledger account.

2. It was evident from Citibank statements that the transfer of AUD110,000 to the Business was as a result of two foreign transfers from He Zong Dong and Lin Hun Yua.  Ms Shi told the tribunal that the transfers came from her brother and sister-in-law in China.  She further explained that she owns property in China, including a five-storey residential building, two shops and an apartment.  The buildings are all rented out and her family controls the bank accounts on her behalf.  When she needs additional funds, she requests that a transfer be made.  After the hearing, given the supporting evidence provided and the time delay in seeking notarised evidence of the property ownership in China, Ms Shi submitted that she would not be providing evidence of her ownership of the various properties in China.

3. In the absence of such evidence, the Tribunal does not make any finding as to whether the entry on 20 October 2014 in the amount of AUD110,000 is a loan from Ms Shi.  As can be seen below, the absence of a finding has no bearing on the outcome of this review.

4. It was evident that Ms Shi had a term deposit with Bank of China Box Hill branch that exceeded AUD48,000 upon maturity on 10 March 2015.  Statements provided after the hearing evidenced the source of the term deposit funds being transfers from Argentina in 2009 and 2012. The transfer pay slip recorded the transfer of AUD48,000 on 4 June 2015 from Ms Shi’s  Bank of China account directly to the CBA account of the Business.  The Tribunal accepts that the transfer is as recorded in the “Loans from directors” general ledger account.

5. The respective CBA bank statements record the transfer of AUD8,000 and AUD26,000 from the joint account of Ms Shi and Mr He to the Business. However, the joint account also records the return payment of AUD26,000 on 29 June 2016 from the Business.  The Tribunal questioned why the credit entry was not recorded in the general ledger.  No explanation was given after the hearing.  Accordingly, the Tribunal does not accept that the $26,000 recorded in the “Loans from directors” general ledger account is an outstanding loan from Ms Shi.

6. Based on the evidence and submissions provided, the tribunal is satisfied that the “Loans from directors” account as at 30 September 2016 and 30 September 2017 was AUD162,965.79 (AUD115,112.23 + AUD48,000 + AUD8,000 – repayments of AUD8,146.44) and that the amounts loaned to the Business were lawfully acquired.

7. Therefore, the Tribunal calculates the net business assets held in Australia by Ms Shi and/or Mr He in the Business during the relevant period are AUD149,772 and AUD189,561 respectively, as set out in the table below.

30 September 2016	30 September 2017 AUD
Total assets per balance sheet provided	298,302	325,562
Less total liabilities per balance sheet provided	(311,495)	(298,966)
Net assets per balance sheet provided	(13,193)	26,596
Loans from directors	162,965	162,965
Net Business Assets	149,772	189,561

1. As can be seen from the table above, the net assets in the Business in Australia of Ms Shi and/or Mr He throughout the relevant period are at least AUD75,000. Based on the written and oral evidence discussed above, the Tribunal is also satisfied that the net assets in the Business have been lawfully acquired. Consequently, the criteria under cl 892.212(c) of Schedule 2 to the Regulations are met and the Tribunal finds accordingly.

   Net business assets and personal assets – cl 892.212(b)

2. Clause 892.212(b) of Schedule 2 to the Regulations requires that the applicant, the applicant’s spouse, or the applicant and his spouse together, held business and personal assets in Australia at the time of application that have a net value of at least AUD250,000 and had a net value of at least AUD250,000 throughout the period of 12 months ending immediately before the application was made, and that these assets were lawfully acquired.

1. To ensure no duplication of funds applied to the Business, bank statements as at 30 September 2016 and 30 September 2017 of personal bank accounts in the name of Ms Shi and joint accounts of Ms Shi and Mr He were before the Tribunal.

2. Ms Shi gave oral evidence that she purchased a property in October 2017.  It was evident from the CBA netsaver bank statement in the name of Ms Shi and Mr He, that a deposit on a residential property purchased in the name of Ms Shi, was paid on 30 August 2016 in the amount of AUD43,851, further evidenced on the Statement of Adjustments at the time of settlement.  The Tribunal accepts this as a net personal asset on 30 September 2016.  The Statement of Adjustments in respect of the residential property records the final settlement as 30 October 2017, being after the relevant period. 

Account	30 September 2016	30 September 2017
Citibank …7363 Ms Shi	103,329.40
CBA…0914 Ms Shi and Mr He	153,393.23	124,450.83
CBA…0893  Ms Shi and Mr He	60,189.86
Deposit on residential property	43,851
Total personal assets	197,244.23	287,970.09

1. As can be seen from the table below, Ms Shi and/or Mr He, held business and personal assets in Australia at the time of application and throughout the period of 12 months ending immediately before the application that have a net value of at least AUD250,000. The Tribunal finds accordingly.

30 September 2016	30 September 2017
Net business assets	149,772	189,561
Total personal assets	197,244	287,970
Net business and personal assets	347,016	477,531

1. Together with the bank statements and evidence provided in respect of the personal assets of the applicants, the Tribunal is satisfied that the business and personal assets held by the applicant, the applicant’s spouse, or the applicant and her spouse together in Australia in the relevant period have been lawfully acquired. Consequently, two of the requisite three subclauses in cl 892.212 of Schedule 2 to the Regulations have been met by the applicants, being cl 892.212(b) and cl 892.212(c) of Schedule 2 to the Regulations. Therefore, the Tribunal finds that cl 892.212 of Schedule 2 to the Regulations has been met.

2. As Ms Shi relied on cl.892.212(b) as one of the two criteria to be met under cl.892.212, cl 892.221(b) of Schedule 2 to the Regulations provides that the applicant must continue to meet those requirements at the time of decision. That is, that the applicant, the applicant’s spouse, or the applicant and her spouse together, hold business and personal assets in Australia that have a net value of at least AUD250,000 at the time of decision.

3. The most recent financial statements in respect of the Business before the Tribunal are for the year ending 30 June 2022. The net assets of the business as at 30 June 2022 totalled AUD115,659 and are unremarkable. The “Loan from directors” account was recorded at AUD290,878. This represents a reduction, or repayment, since 30 September 2017 in the amount of AUD8,088. Therefore, the Tribunal accepts that the “Loan from directors” account for the purposes of this review at the time of decision was likely AUD154,877 (AUD162,965 – AUD8,088). Therefore, the Tribunal finds that the net business assets held in Australia by Ms Shi and/or Mr He at time of decision was approximately AUD270,536 (AUD115,659 + AUD154,877). As the business assets alone exceed the required AUD250,000, the criteria under cl 892.221(b) of Schedule 2 to the Regulations is met without further consideration of the personal assets.

4. It is noteworthy that after the hearing, the Tribunal was provided with the certificate of title recording Ms Shi as the sole owner of the residential property purchased in 2017.  According to a recent council rates notice with a valuation date of 1 January 2021, the estimated capital improved value is AUD450,000.  The title records no encumbrances and Ms Shi gave oral evidence that she owned the property outright and there was no mortgage. She told the Tribunal that she had gradually transferred funds from China and from Argentina which allowed her to meet the costs of the property. 

5. It is also clear that Ms Shi’s ownership interest in the residential property, without further consideration of the business assets, would also result in the net business and personal assets held in Australia by Ms Shi and/or Mr He exceeding AUD250,000.

6. Based on the oral and written evidence discussed above, the Tribunal is satisfied that the business and personal assets held by the applicant, the applicant’s spouse, or the applicant and her spouse together in Australia have been legally acquired. Accordingly, the Tribunal finds that Ms Shi meets the criteria in respect of cl.892.221(b) of Schedule 2 to the Regulations.

7. 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 and fourth 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  (State/Territory Sponsored Business Owner) visa:

   · Cl 892.212 of Schedule 2 to the Migration Regulations 1994 and

   · Cl 892.221(b) of Schedule 2 to the Migration Regulations 1994.

   Robyn Anderson
   Member