UNITED FRIENDS PTY LTD (Migration)

The case involved an application by United Friends Pty Ltd for approval of a nomination under the Direct Entry stream for the position of Cook. The primary dispute concerned whether the applicant, a coffee club franchise operator, demonstrated sufficient financial capacity to employ the nominee for at least two years, as required by regulation 5.19(4)(d)(i) of the Migration Regulations 1994. The Administrative Appeals Tribunal considered evidence including the company's financial statements, which revealed significant accumulated losses and negative net equity since its registration in 2015.

The legal issue before the Tribunal was whether the applicant met all the requirements for approval of the nomination under regulation 5.19(4), specifically focusing on the financial capacity to employ the nominated Cook for a minimum of two years. The delegate had previously refused the application on the grounds that the applicant had not demonstrated this financial capacity, citing accumulated losses of $317,780 in the 2016/17 financial year. The Tribunal also had to consider updated financial information, including a 2019/20 financial year loss of $510,877, and a trading profit that appeared to be largely attributable to government subsidies and Job Keeper payments.

The Tribunal's reasoning centred on the interpretation of "financial capacity" within the context of regulation 5.19(4)(d)(i). Despite the applicant's arguments regarding initial investment costs, increasing sales, and the ability to draw funds from other businesses, the Tribunal found that the persistent accumulated losses and negative net equity indicated a lack of a viable and profitable business. The Tribunal noted that the reported trading profit for the 2019/20 financial year was significantly bolstered by government assistance, and that the business's retained earnings and net equity remained substantially negative. Consequently, the Tribunal was not satisfied that the applicant could sustain the employment of the nominee for the required two-year period.

The Tribunal affirmed the decision under review to refuse the nomination. It concluded that the applicant had not met the requirements of regulation 5.19(4) due to the failure to demonstrate adequate financial capacity.