UNITED FRIENDS PTY LTD (Migration)

UNITED FRIENDS PTY LTD (Migration) [2021] AATA 1595 (29 March 2021)
DECISION RECORD
DIVISION:Migration & Refugee Division
APPLICANT:  UNITED FRIENDS PTY LTD
CASE NUMBER:  1820979
HOME AFFAIRS REFERENCE(S):          BCC2016/1688878
MEMBER:Karen McNamara
DATE:29 March 2021
PLACE OF DECISION:  Sydney
DECISION:The Tribunal affirms the decision under review to refuse the nomination.

Statement made on 29 March 2021 at 11:27am

CATCHWORDS
MIGRATION – approval of a nomination – Direct Entry Nomination stream – position of Cook – financial capacity to employ the nominee for at least 2 years – updated financial information – accumulated losses of business – Government grants and Job Keeper payments – financial liquidity of related business – decision under review affirmed
LEGISLATION
Migration Act 1958, s 359
Migration Regulations 1994, r 5.19
STATEMENT OF DECISION AND REASONS
APPLICATION FOR REVIEW

This is an application for review of a decision made by a delegate of the Minister for Home Affairs on 9 July 2018 to reject the application by United Friends Pty Ltd ATF Friends Together Unit Trust T/A Coffee Club Kempsey (the applicant) for approval of the nomination of a position in Australia under r.5.19 of the Migration Regulations 1994 (the Regulations).
The applicant applied for approval on 10 May 2016. The requirements for the approval of the nomination of a position in Australia are found in r.5.19 of the Regulations which contains two alternative streams: a Temporary Residence Transition nomination stream (r.5.19(3)) and a Direct Entry nomination stream (r.5.19(4)). If the application is made in accordance with r.5.19(2) and meets the requirements of either stream, then the application must be approved. If any of the requirements are not met then the application must be refused: r.5.19(5).
In this case, the applicant has applied for approval of a nomination, seeking to satisfy the criteria in the Direct Entry nomination stream.
The delegate refused the application on the basis the applicant’s nomination did not satisfy r.5.19(4)(d(i) of the Regulations because the application did not demonstrate that the business had the financial capacity to be provide the employee with full-time employment for at least 2 years.
The applicant applied to the Tribunal on 19 July 2018 for review of the delegate’s decision. The applicant submitted a copy of the primary decision record with the review application.
On the 20 November 2020, the Tribunal wrote to the applicant pursuant to section 359(2) of the Act (dispatched by email to the authorised recipient), requesting the applicant to provide updated and current information that would assist to determine whether the criteria in rr. 5.19(2) & (4) of the Regulations were met.
On 7 December 2020 the applicant requested an extension of time to provide finalised financial information being prepared by the applicant’s accountant. The Tribunal granted an extension to 21 December 2020.
Information provided to the Tribunal
On 7, 14 and 21 December 2020, the applicant provided the following documents to the Tribunal;
·Statement (undated) re: genuine need for the position
·ASIC current and historical extract
·RCB Advice 30 August 2016
·Letter of engagement 1 December 2020
·Photographs of business premises
·Position Description
·Organisation chart
·Recruitment summary
·Invoice for job advertisement
·Fair Work Commission - Terms of Settlement
·Business Activity Statements (BAS) returns October 2019 to September 2020
·Profit & Loss statement 2019/20 financial year
·Letter from Accountant dated 18 December 2020.
On 9 February 2021, the Tribunal invited the applicant and nominee to appear before the Tribunal to give evidence and present arguments. The invitation requested the applicant and nominee to provide the following information at least seven days prior to the hearing scheduled for 4 March 2021.
·PAYG summaries issued to nominee 2017, 2018, 2019 & 2020 financial years.
·Business bank statements showing payment of salary to nominee from January 2019 to January 2021.
·Full set of financial statements prepared by an Accountant for 2019 and 2020 financial years.
·Complete BAS returns as submitted via ATO portal for period 1 July 2018 to September 2019.
·Notice of Assessments (NOA’s) issued by the Australian Taxation Office to the Nominee for 2017, 2018, 2019 & 2020 financial years.
·Nominee’s personal bank statements showing receipt of salary from the applicant during the period January 2019 to January 2021.
·Evidence of the Nominee receiving superannuation payments
On 1 March 2021, the applicant provided the following;
·PAYG summaries issued to nominee 2017, 2018, 2019 & 2020 financial years.
·Nominee’s NOA’s 2017, 2018 & 2019 financial years.
·Business bank statements November 2019 to February 2021.
·Financial statements for year ended 30 June 2020
·BAS returns October 2018 to September 2019
·Nominee’s personal bank statements January 2019 to February 2021
·Nominee’s superannuation transaction history 2021 financial year.
On 4 March 2021, the applicant represented by Mr Sartaj Natt appeared before the Tribunal via telephone, to give evidence and present arguments. The Tribunal also received oral evidence from Mr Maninderpal Singh Multani (the nominee) in the related matter for the subclass 187 visa (AAT Case file 1823601). The related matters were heard concurrently in a combined hearing.
The applicant was represented in relation to the review by its registered migration agent. The representative attended the Tribunal hearing.
The Tribunal exercised its discretion to hold the hearing by telephone. The hearing was held during the COVID-19 pandemic. The Tribunal determined it was reasonable to hold a hearing by telephone, having regard to the nature of this matter and the individual circumstances of the applicant and nominee. The Tribunal also had regard to the Tribunal’s objective of providing a mechanism of review that is fair, just, economical and quick, and the delay to the matter if the hearing was not to be conducted by telephone. The Tribunal is satisfied that the applicant and nominee were given a fair opportunity to give evidence and present arguments.
At the conclusion of the hearing, the Tribunal invited the applicant and nominee to provide further documentation including;
·Evidence of applicant making compulsory superannuation contributions to nominee
·Financial evidence of applicant’s current financial position
·Workers compensation policy details showing wages declared
On 11 March 2021, the applicant provided the following documents to the Tribunal;
·Letter from Accountant dated 10 March 2021
·Workers Compensation policy details
·Representatives submission dated 11 March 2021
·Interim Profit & Loss Statement July 2020 to December 2020
·Nominee’s NOA 2020 financial year
The Tribunal has taken into account all of the information before it and for the following reasons, the Tribunal has decided to affirm the decision under review to refuse the nomination.
CONSIDERATION OF CLAIMS AND EVIDENCE
The issue in this case is whether the applicant meets the requirements for approval of the nomination under the Direct Entry nomination stream set out in r.5.19(4), which is extracted in the attachment to this decision. For the nomination to be approved, all the requirements must be met.
BACKGROUND
The applicant operates a coffee club franchise fast casual dining outlet, located in Kempsey NSW. Information before the Tribunal including ASIC records show the company was registered on 18 February 2015.
On 10 May 2016, the applicant lodged an application for an employer nomination approval for the position of Cook (ANZSCO 351411) under the Regional Sponsored Migration Direct Entry stream. The nominated base rate and guaranteed earnings are $45,626 per annum.
The Tribunal notes that numerous evidence and submissions were lodged by or on behalf of the applicant. While the Tribunal has considered all of same, only that which was considered material to its decision has been expressly referred to herein.
Term of employment of the visa holder: r.5.19(4)(d)
Regulation 5.19(4)(d) requires the nominee to be employed in the nominated position for at least 2 years full time, and the terms and conditions of that employment do not expressly exclude the possibility of an extension.
The Tribunal notes that the delegate refused the application on the basis the applicant's nomination did not satisfy r.5.19(4)(d)(i) of the Regulations because they were not satisfied that the applicant had demonstrated the financial capacity to be able to pay the full-time salary for the nominated position for at least 2 years.
At the hearing the Tribunal discussed with the applicant the delegate’s decision of 9 July 2018, in which the delegate raised concerns in regard to (inter alia), the accumulated losses reported by the applicant in their 2016/17 financial year statements. When the delegate made their decision, they noted that the accumulated losses were ($317,780). Evidence before the Tribunal shows that the applicant for the 2019/20 financial year recorded an accumulated loss of ($510,877). Evidence before the Tribunal shows that since the 2015/16 financial year, the business has continued to record negative net equity.
The Tribunal noted that the applicant’s 2019/20 financial statements recorded a trading profit of $19,498 (before tax) however it appears that this profit is attributable to the applicant receiving $71,909 in subsidies including ATO cash boosts, NSW Government grants and Job Keeper payments. The business recorded retained earnings of ($511,077) and negative net equity of ($510,877). The Tribunal discussed with the applicant that the accumulated losses and negative net equity is not an indication of a viable and profitable business and questioned how long the applicant can sustain these losses.
The applicant told the Tribunal that he has other business’s which he can use funds from, to assist this business and doesn’t foresee closing this business as he has been operating it since 2015. The applicant told the Tribunal that accumulated losses are due to the initial investment cost of approximately $500,000 - $600,000 in setting up the store and that sales are increasing. The applicant indicated that a bank loan of $315,000 had been repaid.
The Tribunal invited the applicant to respond to the Tribunal’s concern that if the business recorded a profit when it received Government subsidies then how can the business afford an additional $1,821 to meet the nominated salary of $45,626. The applicant told the Tribunal that sales had increased, and he would meet the additional amount through increased sales.
Post hearing the applicant provided to the Tribunal an interim Profit & Loss Statement for the period July 2020 to December 2020. The statement shows that during this period the applicant recorded $117,966 reported as ‘total other payments’ comprising of;
·ATO Cash Boost $33,966
·NSW Grant $3,000
·Job Keeper $81,000
The interim statement reports gross profit of $233,089.61, total other payments $117,966, total expenses $302,692.43 and net earnings of $48,363.18. Whilst the applicant has recorded an interim profit (before tax of $48,363.18) the Tribunal notes that the applicant’s reported expenses are greater than gross profit and therefore without the $117,966 in Government assisted payments, would most likely have recorded a loss of $69,602.82. Similarly, the applicant’s 2019/20 financial statements report gross profit of $471,678, total other payments $71,909(Government subsidised payments including job keeper), total expenses $524,089 and net earnings of $19,498. Whilst the applicant has recorded a profit (before tax of $19,498) the Tribunal notes that the applicant’s reported expenses are greater than gross profit and therefore without the $71,909 in Government assisted payments would have likely recorded a loss of $52,411.
In assessing the applicant’s capacity to employ the nominee full time in the position for at least 2 years, the Tribunal has taken into consideration the applicant’s financial statements, the nominee and applicant’s bank statements, the nominee’s PAYG summaries, the nominated salary amount and advice from the applicant’s accountant.
In the circumstances, it is difficult to be satisfied that the applicant has the financial capacity to employ the nominee on a full time basis in the position for at least 2 years when the evidence before the Tribunal shows that the applicant since the 2016/17 financial year has reported accumulated losses, negative net equity and expenses greater than gross profit.
The applicant provided oral evidence at the hearing that he was willing to use money from his other business interests to keep this business operational. The Tribunal notes that there is no persuasive evidence to support this claim nor evidence to suggest the financial liquidity of the applicant’s other business interests and is mindful that the other business interests are not the nominating entity. The Tribunal therefore considers this evidence to be an assertion and not a guarantee and places little weighting on this assertion.
The applicant’s balance sheet as of 30 June 2020 (which gives an indication of its financial position at that point in time) shows greater amount of liabilities of $888,252 over its total assets of $377,375 representing an excess of liabilities over assets of ($510,877). In business parlance, a situation where a company’s liabilities exceed its assets and has recorded consecutive negative net equity since the 2015/16 financial year, are considered by the Tribunal not to be indicators of a viable and profitable business.
The Tribunal has considered the applicant and nominee’s bank statements and the nominee’s PAYG summaries. The applicant’s bank statement shows a balance of $54,754 as of 1 February 2021, this balance is far from being sufficient to cover the applicant’s most recently reported negative net equity of ($510,877) or total liabilities of ($888,252)[1].
[1] As provided to the Tribunal in the applicant’s financial year statements for the year ending 30 June 2020.
Whilst the evidence suggests that historically the applicant has maintained payroll and the nominee has received salary payments, evidence before the Tribunal shows that the business has recorded accumulative losses of ($510,877) with recent profit attributable to Job keeper and Government financial support. The Tribunal therefore on balance in consideration of the applicant’s overall financial position, affords little weighting to these historical salary payments.
The Tribunal has considered the letters dated 18 December 2020 and 10 March 2021 provided by the applicant’s accountant regarding the financial position of the business. In the letter dated 18 December 2020 the accountant states ‘We act as external accountants to above named client. We confirm that the financial loss is not actual loss for FY 2020 but actually the business position has improved as compared to year ended 2019.’ In the letter dated 10 March 2021, the accountant reports the total turnover for the period October 2019 to December 2020, impact of COVID-19 on sales and capacity to meet employment obligations. However, the Tribunal affords little weight to these letters as they do not give a complete financial overview of the profit and loss data in the provided business financial statements, nor explanation about the financial implications of the asset deficiency or accumulated negative net equity.
Having overall consideration of the evidence before it, the Tribunal is of the view that there is a lack of evidence that the Tribunal considers concrete and persuasive, to demonstrate the ongoing financial viability of the applicant. As stated previously the accumulated negative net equity recorded in the applicant’s financial statements are not indicative of a viable and profitable business. The Tribunal also notes that Job Keeper payments ceased on 28 March 2021 with final payments to be processed in April 2021. There is no compelling evidence before the Tribunal to support how the applicant will continue to meet payroll post April 2021.
On the information before it and the reasons noted above, the Tribunal finds, it is not satisfied that applicant has demonstrated the financial capacity to pay the full time salary for the nominated position for at least two years. Accordingly, the Tribunal has formed the view that the applicant has not demonstrated that the nominee will be employed as required for the minimum period of two years on a full-time basis as specified in the Regulation. The Tribunal therefore finds the applicant does not satisfy the requirement in r.5.19(4)(d)(i).
Accordingly, the requirements in r.5.19(4)(d) are not met.
For the above reasons the Tribunal is not satisfied that the applicant meets the requirements of r.5.19(4). The applicant has not sought to satisfy the criteria in Temporary Residence Transition Nomination stream, and as such has not met the requirements in r.5.19(3). Accordingly, the nomination of the position cannot be approved. Therefore, the Tribunal must affirm the decision under review.
DECISION
The Tribunal affirms the decision under review to refuse the nomination.
Karen McNamara
Member

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

[2021] AATA 1595

29 March 2021

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Areas of Law

Immigration

Statutory Interpretation

Legal Concepts

Judicial Review

Jurisdiction

Procedural Fairness

Statutory Construction

Appeal