Sushi Yachiyo Pty Ltd and Commissioner of Taxation (Taxation)

Sushi Yachiyo Pty Ltd and Commissioner of Taxation (Taxation) [2020] AATA 2328 (17 July 2020)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2018/3884-3889
Re:Sushi Yachiyo Pty Ltd
APPLICANT

AndCommissioner of Taxation
RESPONDENT

DECISION
Tribunal:Mrs J C Kelly, Senior Member
Date:17 July 2020
Place:Sydney

The objection decision dated 18 May 2018, which determined that the Applicant was correctly assessed for Superannuation Guarantee Charge pursuant to section 5 of the Superannuation Guarantee Charge Act 1992 (Cth) and disallowed the Applicant’s objection, is affirmed.
.............................[sgd]...........................................
Mrs J C Kelly, Senior Member
CATCHWORDS
TAXATION – superannuation guarantee charge – whether a prescribed employee – whether employee holds a position as a senior executive – whether the employee was nominated as mentioned in paragraph 457.223 (2) (c), (4) (d) or (5) (d) of Schedule 2 to the Migration Regulations 1994 – whether employee’s position carries substantial executive responsibility – whether the employee’s qualifications for the position are appropriate – decision under review affirmed
LEGISLATION
Superannuation Guarantee (Administration) Regulations 1993 (Cth) s 7(1)(f)
Superannuation Guarantee (Administration) Act 1992 (Cth) ss 19, 27(1)(d)
Migration Regulations 1994 (Cth) sch 2 reg 457.223
Migration (1993) Regulations (Cth) reg 413.321
Migration (1989) Regulations (Cth) reg 65
Taxation Administration Act 1953 (Cth) s 14ZZK
CASES
Alcan (NT) v Territory Revenue [2009] 239 CLR 27
SECONDARY MATERIALS
Superannuation Legislation Amendment Act (No. 2) 1999 (Cth), Explanatory Memorandum
REASONS FOR DECISION
Mrs J C Kelly, Senior Member
17 July 2020
Introduction

Mr Masaya Sugahara was an employee of Sushi Yachiyo Pty Limited (the Applicant) from July 2012 to September 2016. The issue to be decided is whether he was an employee in respect of whom superannuation contributions were payable.
The Applicant argued that he was not because Mr Sugahara was a senior executive and therefore a “prescribed employee” pursuant to regulation 7(1)(f) of the Superannuation Guarantee (Administration) Regulations 1993 (SGAR).[1] If that is correct, the Super Guarantee Charge (SGC) would be nil pursuant to subsection 27(1)(d) of the Superannuation Guarantee (Administration) Act 1992 (Cth) (the SG Administration Act), which excludes from the calculation of the SGC under section 19, salary or wages paid to a “prescribed employee”.
[1] The SGAR was repealed and replaced in 2018 by the Superannuation Guarantee (Administration) Regulations 2018 (SGAR 2018).
The Respondent, the Commissioner of Taxation (the Commissioner) argued that Mr Sugahara was a cook, and therefore he was an employee in respect of whom superannuation was payable.
Mr Yashio is the sole director and secretary of the Applicant.
How the issue arose
On 23 December 2016, Mr Sugahara advised the Australian Taxation Office (the ATO) that he may not have been paid superannuation. In a letter dated 9 May 2017, an officer of the ATO advised Mr Yashio that he had started an audit of the Applicant’s business for the period 1 July 2012 to 30 September 2016. The letter notes that on 20 April 2017 an officer of the ATO had spoken to Mr Yashio about the superannuation guarantee obligation and indicated that he may not have met his obligations for that period.
Following the audit, on 9 August 2017, the ATO issued amended assessments imposing a superannuation guarantee charge (SGC), which includes the amount of superannuation guarantee shortfall, nominal interest, and an administrative component, for the period 1 July 2012 to 30 September 2016 (the relevant period), on a quarterly basis. The Applicant objected to the amended assessment on 6 September 2017 and has sought review of the objection decision dated 18 May 2018, which determined that the Applicant was correctly assessed for SGC pursuant to section 5 of the Superannuation Guarantee Charge Act 1992 (Cth) (the SGC Act) and disallowed the Applicant’s objection.
Section 5 of the SGC Act provides that a charge is imposed on any superannuation guarantee shortfall of an employer for a quarter. Section 6 of the SGC provides that the appropriate amount of superannuation guarantee shortfall of an employer for a quarter is an amount equal to the amount of the shortfall. Section 3 provides that the SG Administration Act is incorporated and is to be read as one with the SGC Act.
Sub-regulation 7(1)(f) SGAR
From 16 July 1999 until 15 September 2018, sub-regulation 7(1)(f) of the SGAR stated:
7 Certain employees and payments excluded
(1) For the purposes of paragraph 27(1)(d) of the Act, each of the following employees is a prescribed employee:
…
(f) an employee who is the holder of a Subclass 457 (Business (Long Stay)) visa if:
(i) the employee holds a position as a senior executive of a company operating in Australia; and
(ii) the employee was nominated as mentioned in paragraph 457.223 (2) (c), (4) (d) or (5) (d) of Schedule 2 to the Migration Regulations 1994 or identified as mentioned in subparagraph 457.223 (3) (b) (i) of that Schedule; and
(iii) the employee’s position carries substantial executive responsibility; and
(iv) the employee’s qualifications for the position are appropriate; and
(v) the employee’s position is a full-time position.
For the Applicant to succeed, I must be satisfied of each of the five elements of sub-regulation 7(1)(f) for each quarter during the relevant period.
The Commissioner relied upon section 14ZZK of the Taxation Administration Act 1953 (Cth) (the TAA) which, relevantly, limits the Applicant to the grounds stated in the taxation objection under review unless the Tribunal orders otherwise, and casts the burden on the Applicant to prove that the assessment is excessive or otherwise incorrect and what the assessment should have been.
From the evidence, it is clear that Mr Sugahara was an employee of the Applicant who was the holder of a Subclass 457 (Business (Long Stay)) visa and his position was a full-time position. The questions in issue are therefore whether he was an employee who satisfied sub-regulation 7(1)(f)(i), (ii), (iii) and (iv) of the SGAR.
Background facts
The Applicant included with its objection, its “JOB OFFER: POSITION OF COOK (ANZSCO 3514-11) addressed to Mr Sugahara, dated 21 May 2012, and prepared on the Applicant’s letterhead.[2] It stated:
[2] T29, pp 246 to 248.
I have the pleasure in confirming our discussions concerning our offer to you a position of Cook for a four (4) year term with our company. The terms of employment may be briefly outlined as follows:
1.Base Salary  $88,500.00
2.Superannuation  plus 9% employer contribution
3.Duration of employment             Four (4) years
4.Annual leave  …
5.Personal/Carer’s leave and        …
Compassionate leave
6.Community service leave            …
7.Long service leave  …
8.Parental Leave and                    …
related entitlements
9.Requests for flexible working     …
Arrangements
10.Work hours  38 hours per week plus paid
overtime at $50 per hour
11.Public Holidays  …
12.Insurance  Workers Compensation
13.Termination  …
Should you wish to discuss any of the matters arising from our
interview(s) and/or contained in this Letter of Appointment, please
do not hesitate to contact us.
If you accept this offer, please sign the copy of this letter and return it
to us on your commencement day.
Yours sincerely,
(handwritten signature)
SUSHI YACHIYO PTY LTD
I acknowledge and accept the contents of the above letter outlining the terms and conditions of my employment with Sushi Yachiyo Pty Ltd.
Dated: 21/05/2012
(handwritten signature)
MASAYA SUGAHARA
On about 25 June 2012, the Applicant, by its then migration agent and solicitor, lodged by hand with the Department of Immigration and Citizenship (now known as the Department of Home Affairs) in Sydney, a “Sponsorship Application for Subclass 457” on behalf of a visa applicant, Mr Sugahara, a Japanese national.[3] Relevantly, the application stated that:
(a)the Applicant was the sponsor, and
(b)the nominated occupation for Mr Sugahara was “COOK” with a code of “ANZSCO 3514-11”.
[3] T34, pp 419 and ff.
On 1 August 2012, Mr Sugahara was granted a Temporary Business Entry (Class UC) Business (Long Stay) (Subclass 457) visa (the Visa). Materially:
(a)the Applicant was named as sponsor;
(b)the occupation for the holder of the Visa, Mr Sugahara, was “COOK” at a rate of pay of “92000.00”;
(c)the Visa was valid from 1 August 2012 until 1 August 2016;
(d)Condition 8107 required the primary holder of a subclass 456 visa, sponsored to work in Australia to work only in the occupation listed in the most recently approved nomination for the holder; and
(e)the sponsor’s obligations included ensuring that the primary sponsored person works in nominated occupation.[4]
[4] T4, p 26.
During the period 2012 to 2016, the Applicant had restaurants at Darlinghurst, Surry Hills, and Mosman.
The Applicant’s case
The Applicant’s case was that:
·Mr Yashio and Mr Sugihara entered into a private verbal agreement that Mr Sugahara would hold an executive position in the restaurant and be exempt from superannuation.
·The nomination as a cook was on the recommendation of the Applicant’s then migration agent because there was a demand for cooks and it would expedite the application. Mr Yashio no longer has contact with that migration agent.
·Mr Yashio’s nomination of Mr Sugahara was in accordance with the abovementioned regulations and Mr Sugahara was employed as the Chief of Operation (COO) during the Employment Period.
·Mr Sugahara carried out substantial executive responsibilities in his day-to-day duties, was qualified, was provided with substantial training to render him appropriate for the position, and was a full-time employee.
·Mr Yashio nominated a salary for Mr Sugahara consistent with his role as COO during the Employment Period and not that of a cook, which was consistent with the verbal agreement.
·Mr Yashio terminated Mr Sugahara’s employment due to not being able to maintain a high standard of performance required by a COO.
·Mr Sugahara was disgruntled by Mr Yashio’s decision to terminate his employment and not renew his immigration papers in Australia, and brought a superannuation claim to the Commissioner of Taxation.
·The Tribunal should consider all the facts, such as the nature of the business, payment of wages, all the evidence from staff members, suppliers and others who witnessed Mr Sugahara’s day-to-day role in the Applicant’s business, and not merely the immigration papers and the job offer as a cook.
The Applicant’s case did not engage with the law beyond the generalised claims made above which refer to nomination in accordance with the regulation, that is, that Mr Sugahara held a position as a senior executive, carried out substantial executive responsibilities in his day-to-day duties, was suitably qualified, and was a full-time employee.
Consideration
Did Mr Sugahara hold a position as a senior executive of the Applicant and did his position carry substantial executive responsibility?
Neither “senior executive” nor “substantial executive responsibility” is defined under the SG Administration Act or the SGAR.[5] What do those terms mean? It is appropriate to consider them together because the word “executive” is central to their meaning.
[5] SGAR sub-regulations 7(1)(f)(i) and (iii).
In Alcan (NT) v Territory Revenue, the High Court said:
This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.[6]
[6] [2009] 239 CLR 27 at [47], per Hayne, Heydon, Crennan and Kiefel JJ (omitting footnote references).
In addition to the two phrases in sub-regulation 7(1)(f) that are in contention, the Commissioner referred generally to the language and legislative intent revealed by sub-regulation 7(1) of the SGAR and mentioned specifically sub-regulations 7(1)(e) and (g).
It is necessary to consider the complete text of sub-regulation 7(1):
(1)   For the purposes of paragraph 27(1) (d) of the Act, each of the following employees is a prescribed employee:
(a)  an employee who is the holder of an executive (overseas) visa or entry permit (code number 413) granted under the Migration Regulations as in force in the period from the beginning of 19 December 1989 to the end of 31 January 1993;
(b) an employee who is the holder of a Class 413 (executive (overseas) visa or entry permit granted under the Migration (1993) Regulations;
(c)    an employee who has been appointed by a company operating in Australia to be the national managing executive or deputy national managing executive or a state manager and who is the holder of:
(i)    a Subclass 456 (Business (Short Stay)) visa; or
(ii)    a Subclass 956 (Electronic Travel Authority) (Business Entrant — Long Validity)) visa; or
(iii)    a Subclass 977 (Electronic Travel Authority) (Business Entrant — Short Validity)) visa;
(d)    an employee who is the holder of a visa referred to in paragraph (c) if:
(i)    the employee:
(A)     holds a position as a senior executive of a company operating in Australia; or
(B)     is establishing a business activity in Australia on behalf of the employer; and
(ii)    the employee’s position carries substantial executive responsibility; and
(iii)    the employee’s qualifications for the position are appropriate; and
(iv)    the employee’s position is a full‑time position;
(e)   an employee who is the holder of a Subclass 457 (Business (Long Stay)) visa if:
(i)  the employee has been appointed by a company operating in Australia to be the national managing executive or deputy national managing executive or a state manager; and
(ii) the employee was nominated as mentioned in paragraph 457.223 (2) (c), (4) (d) or (5) (d) of Schedule 2 to the Migration Regulations 1994 or identified as mentioned in subparagraph 457.223 (3) (b) (i) of that Schedule;
(f)    an employee who is the holder of a Subclass 457 (Business (Long Stay)) visa if:
(i)    the employee holds a position as a senior executive of a company operating in Australia; and
(ii) the employee was nominated as mentioned in paragraph 457.223 (2) (c), (4) (d) or (5) (d) of Schedule 2 to the Migration Regulations 1994 or identified as mentioned in subparagraph 457.223 (3) (b) (i) of that Schedule; and
(iii)    the employee’s position carries substantial executive responsibility; and
(iv)    the employee’s qualifications for the position are appropriate; and
(v)    the employee’s position is a full‑time position;
(g)    an employee who is the holder of a Subclass 457 (Business (Long Stay)) visa if:
(i)    the employee is establishing a business activity in Australia on behalf of the employer; and
(ii)    the employee’s position carries substantial executive responsibility; and
(iii)    the employee’s qualifications for the position are appropriate; and
(iv)    the employee’s position is a full‑time position.
The Macquarie Dictionary relevantly defines “executive” as:
Adjective 1. Suited for execution or carrying into effect; of the kind requisite for practical performance or direction: executive ability.
2. charged with or relating to execution of laws, or administration of affairs.
…
-noun 4. A person or body having administrative authority as in a company.
…
The Oxford English Dictionary relevantly defines executive as:
A. Adj. 3. A. Pertaining to execution; having the function of executing or carrying into practical effect.
B. n. 3. A person holding an executive position in a business organization; a person skilled in executive or administrative work; a business man.
The Australian Oxford Dictionary (2^nd ed) relevantly defines “executive” as:
A person or body with managerial or administrative responsibility in a business organisation etc.; a senior businessman.
Neither party provided a copy of or addressed the relevant provisions of the Migration Regulations referred to in sub-regulation 7(1)(a) or (b) of the SGAR. They are relevant to the construction of sub-regulation 7(1). Copies of the relevant criteria from the relevant Migration Regulations are set out at Annexure A and B respectively.
Each of sub-regulations 7(1)(d), (f) and (g) of the SGAR require a person to not only hold a particular position, but require the position to carry substantial executive responsibility. Sub-regulations 7(1)(c) and (e) are of similar effect because each of the nominated positions includes the term “managing” or “manager”. In other words, in those two provisions, each nominated position carries substantial executive responsibility.
Consideration of the criteria in the Migration Regulations referred to in sub-regulations 7(1)(a) and (b) reflect the same regulatory scheme.
“Senior executive” in sub-regulation 7(1) is to be construed in the context of the other positions specified: national managing executive, deputy national managing executive, state manager. They are very senior positions in a company or organisation. It is implicit that that the company employing the “senior executive”, or those in the positions referred to, would be relatively large, and have a hierarchical organisational structure with clearly delineated responsibilities and functions. “Senior executive” includes employees who do not hold the specific titles referred to in sub-regulation 7(1) but whose “position carries substantive executive responsibility”. The latter phrase is to be construed in the context of the responsibilities borne by employees in the other positions sub-regulation 7(1) specifies: national managing executive, deputy national managing executive and state manager.
The exemptions specified in sub-regulation 7(1) of the SGAR are intended to capture a group of employees who hold very senior positions in the employer company and who have substantial authority and responsibility for decision-making within the organisation.
Extrinsic material may be considered in the interpretation of an Act or regulation to confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act.[7] It can also be considered to determine the meaning of a provision which is ambiguous or obscure, or the ordinary meaning conveyed by the text, context and purpose or object underlying the act leads to a “result that is manifestly absurd or is unreasonable”.[8]
[7] Acts Interpretation Act 1901 (Cth) (the AIA), s 15AB(1)(a). The SGAR is delegated legislation. The AIA applies to delegated legislation pursuant to s 13(1)(a) of the Legislation Act 2003 (Cth) and s 46 of the AIA.
[8] Ibid s 15AB(1)(b).
The Commissioner referred to the explanatory memorandum accompanying the Superannuation Legislation Amendment Act (No. 2) 1999 (Cth) which, relevantly, amended sub-regulation 7(1) of the SGAR by adding clauses (c) to (g) to reflect changes of visa types which had occurred in 1996. The amendment had retrospective effect.[9]
[9] Clause 2 of Schedule 3 of that Act.
At paragraph 3.10, the explanatory memorandum stated:
The amendments have continued the former SG exemption for senior foreign executives on the basis that senior foreign executives are usually in Australia for only short periods and have retirement income arrangements equivalent or greater than SG in their home countries.

“Senior foreign executives” include the national managing executive, deputy national managing executive, state manager, an employee who is establishing a business activity in Australia, and senior executive, specified in sub-regulation 7(1). The statement confirms the legislative intent of sub-regulation 7(1) and that the meaning of “senior executive” and “substantial executive responsibility” are as discussed above.
Did Mr Sugahara hold a position as a senior executive of the Applicant as required by sub-regulation 7(1)(f)(i) and did his position carry substantial executive responsibility as required by sub-regulation 7(1)(f)(iii)?
The evidence
The cause of the disagreement between the Applicant and Mr Sugahara emerges from an email Mr Yashio sent to Mr Sugahara on 24 November 2016. Mr Yashio stated the following. Mr Sugahara had agreed to be paid $1,000 a week in cash when he came to Australia, he had made a $100,000 loss on the Mosman “branch”, “We are still paying the loss”, and money was owed to the ATO in relation to Mosman. Mr Yashio expressed regret that “we couldn’t support until you get permanent visa”, it was “not only our fault, as government change the law, you could not make sale up to support your own visa, you could not get IELTS” (International English Language Testing System).[10] The Applicant’s position at the hearing was that Mr Sugahara’s employment was terminated because he was not able to maintain a high standard of performance required of a COO.
[10] T4-40.
The contemporaneous documentation from 2012, being the signed job offer, visa application, and visa grant, support a finding that the Applicant employed Mr Sugahara as a cook. The job offer included 9% superannuation. The Applicant’s representative claimed that Mr Sugahara was employed as an executive and was therefore exempt from superannuation payments in an email dated 1 May 2017 during the audit that followed Mr Sugahara’s complaint to the ATO that the Applicant may not have paid superannuation.
Mr Yashio gave oral evidence. He said that the verbally agreed terms of Mr Sugahara’s employment were a base salary of $88,000, provision of a car, including repair and payments of fines, and payment of half the cost of Mr Sugahara’s accommodation.
Mr Sugahara’s PAYG payment summaries for the four financial years ending 30 June 2013, 2014, 2015 and 2016, showed gross payments of $84,960, $92,040, $90,270 and $95,500 respectively. Mr Sugahara acknowledged during the audit that he was provided with accommodation and use of a company car.
In an email to the ATO dated 8 May 2017, the Applicant’s representative stated that Mr Yashio had advised that:
·     He has another restaurant in Mosman;
·     Mr Sugahara was primarily based there;
·     He was in charge of running the restaurant and his position was executive in nature; and
·     The visa application mistakenly represented the specifics of the job role preformed.
Mr Sugahara confirmed to the ATO that he may have been employed as an executive chef as the Applicant claimed and that there was no written contract of the employment arrangement between him and the Applicant.[11]
[11] T5-43.
During the course of the audit, the Applicant provided statutory declarations from eight witnesses, comprising two former employees of the Mosman restaurant, two current employees, a supplier to the Mosman restaurant, the franchisee who took over the Mosman restaurant, a customer of the Mosman restaurant, and a customer of the Darlinghurst restaurant. Six of those witnesses gave oral evidence. Two had returned overseas.
Mr Yashio swore a statutory declaration on 12 May 2017 in which he stated that his then migration agent advised him to proceed with the application for Mr Sugahara as a cook for “expedient purposes” … “rather than as a restaurant manager”. In an email dated 17 May 2017, the Applicant’s representative advised that they were unable to obtain any written evidence from the migration agent whom the Applicant had used to make the visa application.
Eight pages of copies of text messages from Mr Sugahara were provided. Some are in Japanese. The year the messages were sent is not apparent. There are about 35 individual texts in English which report sales and profit in dollar terms, and labour as a percentage, for periods ranging from a day to a month. There are 21 for Surry Hills and 13 for Darlinghurst. Some of the text messages are cut off and not legible.
The Applicant provided a business card on which Mr Sugahara was described as “Chief of Operation” (COO).
On the reverse of the business card was printed:
Ya Chiyo Group
Yachiyo Trading Company (a Cremorne address and a telephone number)
Sushi Yachiyo (a Darlinghurst address and a telephone number)
Katsu Yachiyo (a Surry Hills address and a telephone number)
Jap n’ Eat Yachiyo (a Mosman address and a telephone number)
The last three entries were the names, addresses and telephone numbers of the Applicant’s three restaurants.
The Applicant also provided an invoice dated 24 June 2014 for “Update Business Card”, digital printing of “1000pcs”, and delivery to Darlinghurst. The invoice does not identify the content of the business cards. Mr Yashio said that Mr Sugahara had had the same title on his previous business card.
Following the determination made on 30 May 2017 that Mr Sugahara was entitled to the superannuation guarantee, the Applicant self-assessed the super guarantee shortfalls owed to Mr Sugahara and lodged SGC statements for the relevant period on 23 June 2017. On 7 August 2017, the ATO issued an audit finalisation letter and employee listings for SGC shortfalls for the relevant period. On 9 August 2017, the ATO issued Notices of Amended Assessments for SGC for the relevant period.
On 6 September 2017, the Applicant lodged an objection, based on Mr Sugahara being a prescribed employee for the purposes of the SGAR, and supporting evidence. In Annexure B to the objection, under the heading “Recognition of Errors”, the following statement appeared:
The Applicant recognises its failure to change Mr Sugahara’s position title from Cook to Chief of Operations. We emphasise that this was an error that was absentminded. The Applicant needed to change Mr Sugahara’s job title however, his rate of pay and his place of employment remained the same. Therefore, the Applicant acted out of pure unawareness.
The objection set out grounds including bias, improper purpose, unreasonableness, being unjust, and lack of evidence. The Applicant’s essential ground was that the contemporaneous 2012 documents had been preferred to the Applicant’s other evidence and claims. The Applicant provided much of the same material it had provided during the audit.
In response to a request for information from the ATO, in a letter dated 8 February 2018, the Applicant’s representative explained Mr Sugahara’s role as COO and restaurant manager since his employment began in 2012:
The role of COO/restaurant manager by Mr Sugahara equates to the role of a senior executive of a company with the position carrying substantial executive responsibility of the Applicant at (a Cammeray address) (the restaurant) during 2012 and 2016 for the following reasons. Mr Sugahara was responsible for:
1.    determining objectives and strategies for the restaurant consistent with the view of overall management and responsible for implementing the policies and programs of the restaurant organisation and providing overall direction by way of management;
2.    authorising and organising supplies and resources for the day-to-day operation of the restaurant and for managing and sourcing staff to implement the direction of the restaurant;
3.    monitoring and evaluating performance of organisations against organisational objectives and strategies;
4.    consulting with Mr Yashio and with subordinate staff to ensure recommendations were being implemented on a weekly basis;
5.    monitoring budgets and figures relating to the restaurant on a daily basis. In light of the size of the business and restaurant, Mr Sugahara was representing the restaurant on an executive level.
I infer that the reference to the restaurant at Cammeray is an error and was a reference to the Mosman restaurant.
The representative also explained that:
·The ANZSCO code that appears on the Visa Application was on the recommendation and advice of the migration agent retained at the time of the visa application who advised Mr Yashio to reference “Cook” for the purposes of efficiency. This was at all times intended to be COO changed by the migration agent at a later date. The significantly higher Base Salary on the Job Offer was to formalise a verbal agreement that Mr Sugahara was indeed going to be in the acting capacity of COO at the restaurant.
·The base salary of an average cook was $53,500 per annum.
·Mr Yashio and Mr Sugahara came to a private verbal agreement that superannuation was not to be paid as the position will be changed to its intended executive position immediately as that was the purpose of his employment at the restaurant.
·The restaurant is a small business. It would be unreasonable and detrimental to the business to pay a salary significantly higher than the average salary for such an organisation, instruction and its profitability.
·Mr Yashio no longer had any contact with the previous migration agent.
In response to a further request for information from the ATO, the Applicant’s representative submitted the following on 23 March 2018 in support of the proposition that Mr Sugahara held an executive position for restaurant businesses from 2008 to 2012:
·A translated copy of Mr Sugahara’s chef’s licence issued on 16 March 1998;
·A translated character reference;
·Two letters stating that Mr Sugahara held a management position; and
·Mr Sugahara’s resume.[12]
[12] T37, 494-501.
The character reference referred to Mr Sugahara’s employment from August 2010 until February 2012. He was in charge of the hall and the kitchen; he provided training to the staff, and actively participated in the development of new menus. His resume shows that he worked as a head chef/manager from 2001 to 2007 and from 2009 to 2012. A letter dated 28 March 2012 stated that Mr Sugahara was a manager at Izakaya Kirakuya from February 2009 to July 2010. An undated handwritten letter stated that he had worked as “chef Manager de cuisine” at a venue for one and a half years.
The written and documentary evidence about the Mr Sugahara’s role with the Applicant, apart from the text messages, was about Mr Sugahara’s role at the Mosman restaurant. It was to the effect that he was the manager of that restaurant. Most described him as the COO. The oral evidence gave a broader picture of the Applicant’s operation and Mr Sugahara’s role.
Mr Yashio’s statutory declaration was sworn on 12 May 2017 and dealt with Mr Sugahara’s nomination for the visa as a cook, as referenced in [42]. He said the following during his oral evidence. He started that business in 2009. He was a chef and did not know about immigration regulations. When he met Mr Sugahara in Japan, Mr Yashio was thinking about franchising the business. He offered Mr Sugahara a role managing sales, shops and kitchens for the three restaurants. He was initially going to apply to immigration for a head chef but was advised to put cook. However, he changed Mr Sugahara’s position to COO because he wished to develop a franchise business. Mr Sugahara agreed to work for four years, during which he would improve his English, but he did not work hard enough. Mr Sugahara was responsible for profit and loss. He organised kitchen staff. He was responsible for stock control, including food at all the restaurants
During cross-examination, Mr Yashio said the following. He knew Mr Sugahara because they had worked together for a year when Mr Sugahara was head chef. He told Mr Sugahara that once the business was a franchise, he would give Mr Sugahara a share. Mr Sugahara was more like a business partner to grow the business. They agreed to get Mr Sugahara a working visa and then a permanent visa. Mr Sugahara could study English. It was better than working in Japan. Around the time Mr Sugahara arrived, the Applicant opened the Mosman and Surry Hills restaurants. Mr Sugahara supervised the quality of the food which was prepared at Darlinghurst at lunchtime and delivered to the other two restaurants, as well as supervising the quality of the staff and monitoring profit and loss.
When asked about the Applicant’s organisational objectives and strategies, Mr Yashio said they had them but they were not in writing. In response to the suggestion that the position of COO reflected the future ambition of the Applicant rather than the present reality, Mr Yashio said “yes and no”. He explained that there were no text messages about the profit and loss at the Mosman restaurant because it was long time ago and he had changed his mobile number. When asked why he had described Mr Sugahara as restaurant manager and not COO in his statutory declaration, Mr Yashio said that there was no such position, apparently referring to the visa application.
Mr Susumu Usami’s statutory declaration sworn 12 May 2017 detailed Mr Sugahara’s role at Mosman and then stated:
As a customer who attended Sushi Yachiyo in Darlinghurst on a regular and systematic basis, I often discussed management issues with Mr Sugahara in relation to the above mentioned restaurant because he was COO.
During his oral evidence, Mr Usami said that he visited the Darlinghurst restaurant two or three times a week. At lunchtime, Mr Sugahara would be cooking. He would sometimes see him there at night. He had attended the Mosman restaurant two or three times. He described Mr Sugahara as Executive Chef and COO. He concluded that he was COO because Mr Sugahara had told him that and he had seen him ordering, calculating profit and loss, rostering and educating staff. Mr Usami said that Mr Sugahara made decisions about Mosman and Surry Hills himself. He went to one of those restaurants after preparing the food at Darlinghurst at lunchtime.
Mr Fusao Nakamura was an employee of the Applicant. In his statutory declaration sworn on 12 May 2017, Mr Nakamura said that he was an employee of the Mosman restaurant and described Mr Sugahara’s role there as COO. He said the following in his oral evidence. Mr Sugahara hired him in July 2012, first at Darlinghurst and then at Mosman. Mr Sugahara was probably at Darlinghurst at lunchtime. Mosman did not have lunch. Mr Sugahara taught him how to cook and then Mr Nakamura was a kind of manager. Mr Sugahara was a kind of general manager. All preparation was done at Darlinghurst and then taken to Mosman. Mr Sugahara was his direct boss. If something was serious, he and Mr Sugahara would speak to Mr Yashio.
In cross-examination, Mr Nakamura gave the following evidence. Mr Yashio employed him, was very active in the business and dealt with financial matters. Mr Yashio talked about plans to grow the business. The objective and strategy was to have a proper Japanese restaurant selling a broader range of proper Japanese food. There was no such restaurant in Sydney. Mr Nakamura thought Mr Yashio wanted him as a manager. His first two or three shifts were lunchtime front-of-house at Darlinghurst and then he went to Mosman where he did dinner, front-of-house and kitchen hand work. It was a small restaurant. Mr Sugahara did everything: food and menu preparation and recruiting. When Mosman was taken over by a franchisee, Mr Nakamura and Mr Sugahara went to Surry Hills. Mr Nakamura helped Mr Sugahara if he did not understand anything because his English was not so good. Many waiters and waitresses were Japanese. Mr Sugahara interviewed them. Managerial duties were shared by Mr Sugahara, Mr Yashio and Mr Nakamura. They had many conferences where they shared ideas. There were only four full-time employees in the business. Job titles were given with the hope and expectation that the business would grow. While Mr Sugahara worked for the Applicant, the business peaked with six locations: the three restaurants, an outlet in the city, and two small shops in Neutral Bay selling bottled products and salads respectively. At that time, Mr Nakamura did deliveries and had no time to help Mr Sugahara.
Mr Nakamura’s wife provided a statutory declaration dated 12 May 2017 and gave oral evidence. She was a former employee of Mosman, then Darlinghurst and Surry Hills. She described Mr Sugahara’s role at Mosman as COO. When she started at the Darlinghurst restaurant in September 2012, Mr Sugahara was managing the restaurant, doing rostering, stock and orders and planning the menu with Mr Yashio. She only remembers Mr Yashio during her job interview. When asked who was responsible for managing Darlinghurst, Ms Nakamura said that she was not in a position to answer the question but thought her husband, Mr Sugahara and Mr Yashio were working together. She helped Mr Sugahara with translation. She had the same position as a waitress until she left in 2014.
Mr Fujimoto swore a statutory declaration on 9 May 2017 and gave oral evidence. He supplied the Darlinghurst and Mosman restaurant and described Mr Sugahara’s role as COO from when he first started working at Sushi Yachiyo in 2012. He described Mr Sugahara as a very experienced chef who was in charge of everything from cooking to ordering, taking bookings and instructing wait staff. He was the COO of Darlinghurst and Mosman. If Mr Yashio was present, Mr Fujimoto would speak to him but most of the time he spoke to Mr Sugahara. When he introduced a new product, Mr Yashio would ask Mr Sugahara’s opinion about the price. Sometimes Mr Sugahara would say the budget was tight and would decrease the order. Mr Sugahara told Mr Fujimoto that he had different menus for Mosman and Darlinghurst. Mr Sugahara was involved in creating some sauce to sell in the Neutral Bay shop.
Mr Noda swore a statutory declaration on 15 May 2017 in which he described himself as a regular customer of Mosman and described Mr Sugahara’s role as COO there. In his oral evidence he said that he owned a Japanese nightclub which Mr Sugahara attended “at the beginning”, often with Mr Yashio. He had attended both Mosman and Darlinghurst. Mr Yashio was the boss. Mr Sugahara was the executive chef and manager.
Mr Oda swore a statutory declaration in May 2017 in which he described himself as a former employee and described Mr Sugahara’s role at Mosman as COO. He said the following during his oral evidence. He started working for the Applicant in 2011 and left in April 2013. He resigned to Mr Yashio who was the boss. He started at Darlinghurst as a cook and was then head chef and manager at Surry Hills. Mr Sugahara worked at Mosman and prepared food at Darlinghurst and delivered it. He ranked Mr Sugahara as next to Mr Yashio in the organisation, and above himself and the third manager at Darlinghurst. Mr Sugahara managed people. Mr Oda and the manager at Darlinghurst did not.
Conclusion
The evidence leads to the following conclusions.
Mr Sugahara’s knowledge, expertise and experience in the preparation and presentation of a wide range of quality Japanese food was greater than that of Mr Yashio. The Applicant employed him to provide that expertise to enable Mr Yashio to grow a business by establishing restaurants that served a wider range of quality Japanese food than had previously been available in Sydney, and which presented the food in the appropriate Japanese manner. That is why Mr Sugahara was involved in employing, some, if not all, employees. He oversaw the food to be served in each of the restaurants and sold in the other outlets in consultation with Mr Yashio who made the decisions. Mr Sugahara also managed Mosman until it became a franchise.
Mr Yashio’s long-term strategy was to franchise the business in the future.
The evidence suggests that the original plan was for Mr Sugahara to become either a franchisee or oversee the quality of the food and its presentation when the business had grown and become a franchise. The title of COO seems rather broader than such a role in a future larger business. In any event, it does not reflect the role he actually had from 2012 to 2016 at Mosman and in relation to the other two restaurants and outlets.

During the period in issue, the business was small, employing only four people full-time and having a number of part-time employees. The number of both may have varied over time. Surry Hills and Mosman were opened on the basis that Mr Sugahara, or a person with his experience and expertise, was to be employed.
Mr Sugahara’s remuneration, including his salary and car and accommodation allowances, reflected his value to the Applicant. The amount quoted in the Job Offer was approximately the value of his remuneration for the first year of his employment. I infer that the gross payments in the PAYG statements include his salary, car and accommodation allowances. That is supported by Mr Yashio’s statement in the email at the end of 2012 that Mr Sugahara had agreed to receive $1,000 a week in cash, which probably reflected his net salary. He was employed in accordance with the job offer, which included superannuation. The evidence of a private oral agreement which excluded superannuation is not persuasive.
I give little weight to the text messages from Mr Sugahara about profit, loss and labour. They are relatively few for a period of four years. They are not evidence that Mr Sugahara was responsible for the financial management of the Applicant. I infer that the budget for food was determined through consultation between Mr Sugahara, as the person responsible for the quality and range of food, and Mr Yashio who made the decisions. There were managers of each of the three restaurants. Mr Sugahara’s responsibility was greater than that of the managers of Darlinghurst and Surry Hills because of his role in relation to food. I accept that he managed Mosman until it was franchised sometime before his employment ended. However, the operations of each of the restaurants and the other outlets that existed at various times, were controlled by Mr Yashio.
Mr Sugahara’s role was not that of a senior executive within the meaning of sub-regulation 7(1)(f)(i) of the SGAR. His position did not carry substantial executive responsibility within the meaning of sub-regulation 7(1)(f)(iii) of the SGAR.
Was Mr Sugahara nominated in accordance with the Migration Regulations 1994 (Cth)?
The Commissioner did not argue that Mr Sugahara was not nominated in accordance with the Migration Regulations 1994 (Cth). It did point out the following. On 16 July 1999 when sub-regulation 7(1)(f)(ii) of the SGAR commenced, it correctly referenced the sub-regulations of regulation 457.223 of Schedule 2 of the Migration Regulations 1994 (Cth) (regulation 457.223). The sub-clauses of regulation 457.223 were (2)(c), (3)(b)(i), (4)(d) and (5)(d). The SGAR provisions were not amended when subsequent amendments, of which there were several, were made to regulation 457.223.
The Respondent argued that the need for ‘nomination’ by the proposed employer remained in regulation 457.223 after the amendments and when Mr Sugahara’s visa was approved on 1 August 2012. The relevant criteria are to be satisfied at the time of decision.[13]
[13] Regulation 457.22
When sub-regulation 7(1)(f)(ii) of the SGAR commenced on 16 July 1999, sub-regulation 457.223(4) provided:
Sponsorship by Australian businesses: key activities
(4)     The applicant meets the requirements of this subclause if:
(a)     the activity in which the applicant proposes to be employed in Australia by a person (in this subclause called "the employer") is a key activity; and
(b)     that activity is the subject of an approved business nomination by the employer; and
(c)     the employer is:
(i)     a pre-qualified business sponsor; or
(ii)     a standard business sponsor; and
(d)     the applicant is nominated in relation to the activity by the employer; and
(e)     where:
(i)     the employer is a standard business sponsor; and
(ii)     the application is made for a stay in Australia of more than 12 months;
the applicant demonstrates (if so required by the Minister) that the applicant has the skills necessary to perform the activity.
Regulation 457.223(4) as it was at 1 August 2012 is Annexure C to this decision. It was entitled Standard business sponsorship. The requirement for nomination by the proposed employer remained in sub-regulation 457.223(4) as at 1 August 2012.
The Respondent does not dispute that the Applicant, as a “standard business sponsor”, nominated Mr Sugahara in the position of cook to obtain the visa.[14]
[14] T34, 421-425; sub-regulation 457.223(4)
As the visa was granted to Mr Sugahara, the decision-maker was satisfied that either sub-regulation 457.223(4)(a)(i) or (ii) of the Migration Regulations 1994 (Cth) had been met. I accept the Respondent’s submission that Mr Sugahara was nominated in accordance with the Migration Regulations 1994 (Cth) then in force, but was his nomination as a cook sufficient to satisfy sub-regulation 7(1)(f)(ii) of the SGAR?
Regulation 7(1) of the SGAR excludes certain employees from the SGC. Sub-regulation 7(1)(f) applies to an employee who is the holder of a Subclass 457 (Business (Long Stay) visa. It set out the criteria that employee must satisfy. Sub-regulation 7(1)(f)(i) requires the employee to hold a position as a senior executive. Each of sub-regulations 7(1)(f)(iii), (iv) and (v) further qualify the “position” referred to in sub-regulation 7(1)(f)(i). Sub-regulation 7(1)(f)(ii) does not refer to the employee’s “position”, but requires nomination, relevantly, pursuant to paragraph 457.223(4). Sub-regulation 457.223 has at all relevant times required the nomination of the applicant to be for a specified activity, occupation, or business activity. Considering the text and context of sub-regulation 7(1)(f) and sub-regulation 457.223, sub-regulation 7(1)(f)(ii) requires that Mr Sugahara’s nomination must have been for a position of “senior executive”.
The decision-maker granted Mr Sugahara’s visa based on his nomination for the position of “cook”. It was not a nomination for a position of “senior executive” of a company operating in Australia. The Applicant claimed that there was no ANZSCO code for COO. However, there were ANZSCO codes that could have been used to describe the role the Applicant claimed that Mr Sugahara held:
(a)Corporate General Manager (alternative title, Chief of Operations) 111211, or
(b)Café or Restaurant Manager – 141111.[15]
[15] ST4 at 77, ST5 at 79 and 81.
The Applicant’s explanations for not nominating Mr Sugahara as a senior executive do not assist. Despite claiming that the nomination was to be changed, the Applicant took no action to do so.
Conclusion
For the above reasons, Mr Sugahara was not nominated in accordance with the Migration Regulations 1994 (Cth) as required by sub-regulation 7(1)(f)(ii) of the SGAR.
Did Mr Sugahara have appropriate qualifications for the position?
Mr Sugahara’s employment history, set out above at [54] to [55] show that he held a chef licence and had worked as a chef, head chef and manager. However, there is no detail about what he actually did as a manager. He is very experienced as a chef. The evidence does not support a finding that Mr Sugahara had appropriate qualifications for the position of senior executive as required by sub-regulation 7(1)(f)(iv).
Conclusion
For the above reasons, Mr Sugahara did not satisfy sub-regulation 7(1)(f) of the SGAR.
DECISION
The objection decision dated 18 May 2018, which determined that the Applicant was correctly assessed for Superannuation Guarantee Charge pursuant to section 5 of the Superannuation Guarantee Charge Act 1992 (Cth) and disallowed the Applicant’s objection, is affirmed.

I certify that the preceding 87 (eighty-seven) paragraphs are a true copy of the reasons for the decision herein of Mrs J C Kelly, Senior Member

................................[sgd]........................................
Associate
Dated: 17 July 2020

Date(s) of hearing: 1-3 July 2019

Solicitors for the Applicant: Mr J Horie, Advantage Partnership Lawyers

Counsel for the Respondent: Mr S Richardson

Solicitors for the Respondent: Mr A Sharma, Australian Taxation Office
Annexure A – Migration (1989) Regulations
Executive (overseas) visa
65. The additional criteria in relation to an executive (overseas) visa are the following criteria:
…
(b) if:
(i) the applicant has been appointed by a company operating in Australia to be the national managing executive or a deputy national managing executive or a State manager; and
(ii) the company is operating as a business; and
(iii) the applicant intends to stay in Australia for more than 4 months;

the applicant produces evidence of sponsorship by the company;
(c) if the applicant is a senior executive of a company operating in Australia (not being the national managing executive or a deputy national managing executive or a State manager) – the applicant establishes:
(i) that the position to which the application relates carries substantial executive responsibility; and
(ii) that the applicant’s qualifications for the position are appropriate; and
(iii) that the position is a full-time position; and
(iv) that the position is to be adequately paid, having regard to Australian levels of remuneration and conditions; and
(v) that the company is operating as a business; and
(vi) if the applicant intends to stay in Australia for more than 4 months – that the applicant is sponsored by the company; and
(vii) if the Minister so requires – that labour market requirements have been met.

Annexure B – Migration (1993)Regulations
Relevantly, the criteria for the grant of a Class 413 (executive (overseas)) visa or entry permit under the Migration (1993) Regulations were:
413.321 (1) The applicant meets the requirements of any one of subclauses (2), (3) or (4).
(2) An applicant meets the requirements of this subclause if:
(a) the applicant intends to establish in Australia a branch of an overseas company; and
(b) the establishment of the branch will provide Australia with substantial international trade o other economic benefits.

(3) An applicant meets the requirements of this subclause if:
(a) the applicant has been appointed by a company operating in Australia to be the national managing executive or a deputy national managing executive or a state manager; and
(b) the company is operating as a business; and
(c) in the case of an applicant who intends to stay in Australia for more than 4 months, the applicant is sponsored by the company.

(4) An applicant meets the requirements of this subclause if the applicant is a senior executive of a company operating in Australia (not being the national managing executive or a deputy national managing executive or a state manager), and the applicant establishes:
(a) that the position to which the application relates carries substantial executive responsibility; and
(b) the applicant’s qualifications are appropriate; and
(c) the position is a full-time position; and
(d) that the position is to be adequately paid, having regard to Australian levels of remuneration and conditions; and
(e) that the company is operating as a business; and
(f) if the applicant intends to stay in Australia for more than 4 months, that the applicant is sponsored by the company; and
(g) if the Minister so requires, the labour market requirements have been met.

ANNEXURE C – Migration Regulations 1994 (Cth), Schedule 2, sub-regulation 457.223(4) with effect from 1 July 2012
Standard business sponsorship[16]
[16] The following sub-regulations have been omitted by operation of the Migration Amendment Regulations 2009 (No. 9) (also known as Select Legislative Instrument 2009 No. 202) with effect from 14 September 2009: 4(b), (c), (ed), (ee), (g), (h), (i), (j) and (k).
(4)     The applicant meets the requirements of this subclause if:
(a)     either:
(i)     if the applicant and a business activity specified in the application and relating to the applicant were the subject of an approved business nomination under regulation 1.20H as in force immediately prior to 14 September 2009:
(A)     the nomination was made by a person who was a standard business sponsor at the time the nomination was approved; and
(B)     the approval of the nomination has not ceased to have effect under subregulation 1.20H(5) as in force immediately prior to 14 September 2009; or
(ii)      if a nomination of an occupation in relation to the applicant has been approved under section 140GB of the Act:
(A)     the nomination was made by a person who was a standard business sponsor at the time the nomination was approved; and
(B)     the approval of the nomination has not ceased as provided for in regulation 2.75; and

Note The definition of occupation in clause 457.111 includes the activity mentioned in subparagraph (i).
(aa)     the nominated occupation is specified in an instrument in writing for paragraph 2.72(10)(a) or (aa) that is in effect; and
(ba)     if the business activities of the person who made the approved nomination include activities relating to either or both of:
(i)     the recruitment of labour for supply to other unrelated businesses; and
(ii)     the hiring of labour to other unrelated businesses;
either:
(iii)     the occupation is undertaken in a position with a business, or an associated entity, of the person who made the approved nomination; or
(iv)     the occupation is specified by the Minister in an instrument in writing for this subparagraph; and

(d)     the Minister is satisfied that:
(i)     the applicant’s intention to perform the occupation is genuine; and
(ii)     the position associated with the nominated occupation is genuine; and

(e)     if the Minister requires the applicant to demonstrate that he or she has the skills that are necessary to perform the occupation — the applicant demonstrates that he or she has those skills in the manner specified by the Minister; and
(ea)     if:
(i)     the applicant would be required to hold a licence, registration or membership that is mandatory to perform the occupation nominated in relation to the applicant; and
(ii)     in order to obtain the licence, registration or membership, the applicant would need to demonstrate a level of English language proficiency equivalent to the level of English language proficiency that is required to achieve an IELTS test score of more than 5 in each of the 4 test components of speaking, reading, writing and listening;
the applicant has proficiency in English of at least the standard required for the grant (however described) of the licence, registration or membership; and

(eb)     if:
(i)     the applicant is not an exempt applicant; and
(ii)     subclause (6) does not apply to the applicant; and
(iii)     at least 1 of subparagraphs (ea)(i) and (ii) does not apply;
the applicant has a level of English language proficiency that is required to achieve an IELTS test score of at least 5 in each of the 4 test components of speaking, reading, writing and listening; and

(ec)     if the Minister requires the applicant to demonstrate his or her English language proficiency — the applicant demonstrates his or her English language proficiency in the manner specified by the Minister; and
(f)     either:
(i)     there is no adverse information known to Immigration about the person who made the approved nomination mentioned in paragraph (a) or a person associated with that person; or

(ii) it is reasonable to disregard any adverse information known to Immigration about the person who made the approved nomination mentioned in paragraph (a) or a person associated with that person.

[2020] AATA 2328

17 July 2020

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Appeal

Date(s) of hearing:	1-3 July 2019
Solicitors for the Applicant:	Mr J Horie, Advantage Partnership Lawyers
Counsel for the Respondent:	Mr S Richardson
Solicitors for the Respondent:	Mr A Sharma, Australian Taxation Office