Yao (Migration)

Yao (Migration) [2017] AATA 2493 (24 November 2017)
DECISION RECORD
DIVISION:Migration & Refugee Division
APPLICANTS:  Ms Jin Yao
Miss Yiyi Zhang
Mr Yong Zhang
CASE NUMBER:  1622135
DIBP REFERENCE(S):  CLF2013/40911 CLF2013/40913 CLF2013/40914 CLF2013/40915 CLF2013/40917 CLF2013/40921 CLF2014/8238
MEMBER:R. Skaros
DATE:24 November 2017
PLACE OF DECISION:  Sydney
DECISION:The Tribunal remits the application for a Business Skills (Residence) visa for reconsideration, with the direction that the first named applicant meets the following criteria for a Subclass 890 visa:
·cl.890.212 of Schedule 2 to the Regulations.
Statement made on 24 November 2017 at 1:58pm

CATCHWORDS
Migration – Business Skills (Residence) visa – Subclass 890 – Federal Circuit Court remittal – Net value of main business – Family members made loans to their company
LEGISLATION
Migration Act 1958 ss 65
Migration Regulations 1994 Schedule 2 cl 890.212

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 Immigration on 13 March 2014 to refuse to grant the visa applicant a Business Skills (Residence) (Class DF) Subclass 890 visa under s.65 of the Migration Act 1958 (the Act).
The applicant and her spouse applied for the visa on 27 February 2013 on the basis of their ownership interest in Q&Y (Aust) Pty Ltd (Q&Y) which operates a shop and fuel franchise, Metro Petroleum, in Marrickville. By August 2011, the applicant had acquired 50% of the shares in Q&Y.
The delegate refused to grant the visa on the basis that cl.890.212 of Schedule 2 to the Migration Regulations 1994 (the Regulations) because the delegate was not satisfied that the assets of the applicant and her spouse in the main business in Australia had a net value of at least AUD $100,000 at the time of application and throughout the period of 12 months ending immediately before the application was made. In calculating the applicant and her spouse’s assets in the business, the delegate was not satisfied of the value of the goodwill of the business because no evidence had been provided to show the funds that were used to purchase the business. The delegate noted that the applicant was claiming the funds ($490,000) used for the purchase of shares in Q&Y as a loan to the business. The delegate was also concerned that no evidence had been provided to show that a director’s loan of $350,000, which appeared in earlier financial statements, had been repaid. After deducting the value of the goodwill and adding $350,000 as a liability, the delegate found that the net value of the applicant’s assets in the business fell below the required amount of $100,000.
The applicants applied for review of the decision and the Tribunal (differently constituted) affirmed the Department’s decision. The Tribunal accepted the value of the goodwill of the business but did not accept that the claimed loan of $490,000 could form part of the applicants’ assets as they did not have at least a controlling share of the shareholding and the funds were not used for the day to day operations of the business. The Tribunal did not accept that in those circumstances the payment of $490,000 can be considered a loan to the business.
The applicants applied to the Federal Circuit Court for judicial review of that decision. Before the Court, the applicants submitted that the Tribunal erred in not finding that the $490,000 loan advanced by the applicants to the Company as a net asset on the basis that they did not hold a controlling interest. It was submitted that the funds were advanced to the Company, available for its use and properly a liability of the Company in favour of the applicants. In the alterative, if the Tribunal is correct that the $490,000 was not a loan to the Company then it should have been excluded as a liability and the net assets of Q&Y would have increased by $490,000.
On 16 December 2016 the Court found that the Tribunal had erred in the way it considered the loan and remitted the matter to the Tribunal for reconsideration.
The applicant and her spouse appeared before this Tribunal on 21 June 2017 to give evidence and present arguments. The Tribunal hearing was conducted with the assistance of an interpreter in the Mandarin and English languages. The Tribunal also notes that the applicant and her spouse also appeared before the Tribunal (differently constituted) on 24 April 2015.
The applicants were represented in relation to the review by their registered migration agent. The representative attended the Tribunal hearing.
For the following reasons, the Tribunal has concluded that the matter should be remitted for reconsideration.
CONSIDERATION OF CLAIMS AND EVIDENCE
The issue in the present case is whether the applicants meet the requirement of cl.890.212 which states:
The assets of the applicant, the applicant’s spouse or de facto partner, or the applicant and his or her spouse or de facto partner together, in the main business or main businesses in Australia:
(a) have a net value of at least AUD100 000; and
(b) had a net value of at least AUD100 000 throughout the period of 12 months ending immediately before the application is made; and
(c) have been lawfully acquired by the applicant, the applicant’s spouse or de facto partner, or the applicant and his or her spouse or de facto partner together.
The applicant and her spouse applied for the visa on the basis of their ownership interest Q&Y (Aust) Pty Ltd (Q&Y of the Company) which operates Metro Petroleum Marrickville (Metro or the business). The contract of sale of business indicates that Q&Y purchased Metro in September 2008 from W&Z (Aust) Pty Ltd for $700,000 which was wholly apportioned as the value of the business’ goodwill.
Q&Y was registered with ASIC on 1 October 2008 with 10,000 ordinary shares issued. The shares were held in equal amounts by Minghai Zhang and Lingrong Zhou (the sister of Mr Zhang’s spouse). In December 2010 Mr Minghai Zhang and Ms Lingrong Zhou agreed to sell 5,000 shares to the applicant and her spouse. This sale occurred through a number of transactions as follows: On 7 January 2011 Mr Zhang transferred 1,000 shares to the applicant’s spouse. On the same day, Ms Zhou transferred 2000 shares to the applicant’s spouse. On 9 August 2011 Ms Zhou transferred a further 2000 shares to the applicant. According to the records held by ASIC in respect of Q&Y, the applicant and her spouse held a total of 5000 shares in Q&Y jointly, being 50% of the shares in that Company.
Bank statements for the applicants and Company’s show that the applicants transferred a total of $490,000 to the Company’s account between 30 November 2010 and August 2011. A question arose as to whether those funds were for the applicants’ purchase of shares in Q&Y or were a loan to the Company. How those funds were dealt with and the Tribunal’s consideration of this issue is the subject of detailed discussions below.
Q&Y’s balance sheet for the relevant periods (which formed part of the unaudited financial statements provided with the visa application) relevantly show the following:
31 December 2012                  31 December 2011
Current assets:
Cash assets   $ 52,076.93                           $ 39,221.97
Receivables[1]   $ 118,893.91
Inventories[2]   $ 191,500.00  $ 193,500.00
Current tax assets   $ 2,163.00   $ 1,285.00
Total current assets   $ 245,739.93  $ 352,900.88
Non-current assets:
Intangible assets[3]  $ 496,420.24  $ 496,420.24
Other   $ 29,775.00                          $ 29,775.00
Total non-current assets  $ 526,195.24   $ 526,195.24
[1] Note 5: other loans
[2] Note 6: raw material and stores at cost
[3] Note 10: Goodwill at cost
Total assets  $ 771,935.17   $ 879,096.12
Current liabilities:
Financial liabilities[4]    $ 210,381.31  --
Current tax liabilities[5]     $ 12,054.00   $ 1,651.00
Total current liabilities       $ 222,435.31  $ 1,651.00
Non-current liabilities:
Financial liabilities[6]  $ 490,000.00  $ 840,000.00
Total liabilities  $ 712,435.00  $ 841,651.00
Total net assets:   $59,500.86   $37,445.12
[4] Note 11: unsecure loans
[5] Note 12: GST clearing & amount held from salary and wages
[6] Note 11: secured loans from Jin Yao (the applicant)
On review, the applicants provided a number of further documents to address the concerns by the delegate. The Tribunal has had regard to these documents, as well as the supporting submissions and the applicants’ oral evidence at the hearings in its considerations.
In relation to the concerns regarding the goodwill and the concerns raised about Q&Y having entered into a contract to purchase the business prior to its registration, the applicant’s former representative provided the following documents:
·Q&Y’s financial statements for 2009, 2010, 2011, 2012 and 2013
·Activity statements
·2008 Contract front page, Disclosure document and Stocktake report
·AASB 1013, Accounting for Goodwill
·Westpac bank statements for Minghai Zhang and his spouse, from August to November 2008, showing a total of $700,000 withdrawal: $350,000 on 13 October 2008 and $350,000 on 15 October 2008.
The contract for the sale of business detailing the purchase of Metro by Q&Y from W&Z is dated 18 September 2008. Stamp duty was paid in respect of this transaction as evidenced by the stamping of the front page of the contract by the NSW Office of State Revenue. The Disclosure document in respect of the purchase of the business shows that Minghai Zhang and Lingrong Zhou signed, in their capacity as directors, “for and on behalf of the prospective retailer” on 29 September 2008. The registration of the purchasing entity (Q&Y), for which Minghai Zhang and Lingrong Zhou were directors, occurred on 1 October 2008 and settlement of the purchase of Metro occurred on 15 October 2008 when the remaining $350,000 of the $700,000 payment for the business was made. While there is no evidence to show where the two payments of $350,000 from Mr Minghai Zhang’s account went, it is reasonable to conclude from all of the available evidence, including the contract of sale, the timing and the amounts withdrawn, that the funds were for the purchase of Metro. The stocktake report shows that the total value of the business’ stock was $83,400. This was not noted on the contract of sale and the whole of the purchase price ($700,000) was apportioned to goodwill. It is relevant to note that the contract of sale is dated prior to the Disclosure document and stocktake report and made no provision for the value of the business’ stock. The explanation provided in the submissions regarding this issue is that at the time of signing the contract the purchaser and the vendor had agreed that the ‘goodwill’ is the major asset of the business and as such decided to apportion the full purchase price of $700,000 to that asset.
The representative also referred to Q&Y’s financial statements and indicated that since the purchase of the business there has been a provision in Q&Y’s financial statements for intangible assets which were valued “at cost” as being $496,420 and was consistent with the business’ performance in the corresponding years which, as indicated by the financial reports, shows a consistent gross profit of between $380,000 and $430,000.
Having considered all the evidence and submissions, the Tribunal is satisfied that the applicants have now demonstrated the funds used to purchase the business, which included payment for goodwill. The Tribunal acknowledges that the stock value was not accounted for in the purchase price and accepts the explanations provided for why this occurred. In any case, even if the Tribunal was to deduct the value of the stock from the purchase price, this would still indicate that the purchasers paid about $615,000 for goodwill. The valuation ‘at cost’ of $496,420 for goodwill which appears in all of Q&Y’s financial statements is, in Tribunal’s view, a fair valuation considering the nature of the business (which is a franchise) and its financial performance which, according to the financial statements, has been relatively consistent.
Given the above, the Tribunal is satisfied that value of $496,420 for goodwill as at 31 December 2011 and 31 December 2012 is an asset of the Company and should be included in calculating the applicants’ assets in the business.
No concerns were raised regarding any of the other stated items of Q&Y’s assets. The cash assets can be verified by reference to the bank statements provided and the inventories, while not substantiated by other evidence such as an inventories report, are consistent with the balances for inventories in the financial statements provided for the other financial years, including pre and post the relevant periods. The Tribunal notes however that there appears to have been an issue with the balance for receivables of $118,000 which was included in the Company’s current assets as at 31 December 2011. In the audited financial reports provided to the Tribunal for the relevant periods, that item (receivables) was removed thereby reducing the Company’s current assets to $234,007 and its total assets to $760,202 as at 31 December 2011.
The Tribunal notes that the auditor’s report dated 18 September 2017 in respect of the financial statements for the relevant periods were heavily qualified due to lack of sufficient and appropriate evidence provided by the Company in relation to inventory, intangible assets and unsecured other loans. The auditor noted that the Company had not kept sufficient records beyond 5 years to enable a complete audit of the relevant periods to be conducted. For this reason, the Tribunal has been cautious when considering the financial reports and, where possible, has sought to verify the information with reference to other supporting evidence.
Returning to the calculation of the assets, the Tribunal notes that there is limited evidence regarding the claimed receivables of $118,893 in the initial financial report and accordingly considers that the adjustments made in the audited reports removing that item appears to be a more accurate reflection of the Company’s financial position as at 31 December 2011.
Given the above, the Tribunal finds that the total assets of Q&Y as at 31 December 2012 and 31 December 2011 are $771,935 and $760,202 respectively.
In relation to Q&Y’s liabilities, the delegate was concerned firstly, that the applicants were seeking to claim the amounts paid for their purchase of 50% of the shares in Q&Y as a loan to the Company, secondly, that there was no evidence that the $350,000 loan to other shareholder (Lingrong Zhou) which appeared in the previous financial statements had been repaid, and thirdly, that the ASIC extract for Q&Y shows that a charge in favour of the National Australia Bank had been placed on the Company on 20 December 2010 and no evidence had been provided to show the status of that loan.
In response to a request for information regarding the above concerns, the following relevant documents were provided to the Tribunal. A letter in which Ms Zhou and her sister (Mr Minghai Zhang’s spouse) explained that Ms Zhou had made a director’s loan to Q&Y for the amount of $350,000 and that this loan had been repaid on 3 December 2010. A letter from the applicants, dated 30 April 2015, stating amongst other things that they did invest $490,000 into the Company which was much higher than the required $100,000
Also provided was a letter from the Company’s accountant, Mr John Ma, dated 30 April 2015 regarding the ‘loan’ from the applicant in which he states the following: That the financial statements show that Ms Yao made loans totalling $440,000 and $490,000, in 2011 and 2012 respectively, to the Company. Those loans were made personally by Ms Yao from the joint bank account, which show withdrawals of $390,000 and $90,000 on 30 November and 1 December 2010. A further sum of $50,000 was withdrawn in August 2011. That the transaction history explains the amounts shown in the financial statements as a liability. In addressing the concern as to whether that director’s loan is also being treated as an asset because those funds correspond with the price paid for the shares in the Company, it was stated that the accounting treatment of the director’s loan is to identify it as a “loan” but as it is paid into the Company the funds become available to the Company so that it has the funds available to it to operate the business and to that extent it become an asset. In terms of the impact of these arrangements the net effect is zero in terms of the asset profile of the Company by reason of double entry book keeping.
In relation to the director’s loan in favour of Ms Zhou it was stated that the Westpac account statements for Q&Y show that on 2 December 2010 the sum of $350,000 was drawn from the Company’s account and received into the joint account of Minghai Zhang and his spouse (Ms Zhou’s sister) and that this payment was made at the direction of Ms Zhou. It was stated that this was an arrangement between the sisters and to that extend the debt was discharged and Q&Y no longer owed any money to Ms Zhou.
In relation to the NAB charge over the Company, it was stated that this was discharged on 11 October 2012. An updated ASIC statement was provided to confirm the discharge. As to its accounting treatment, it was explained that the charge was a contingent liability and not a debt. It would have only become a debt if the borrower QY & Lynn Pty Ltd (a different entity in which Mr Minghai Zhang had an interest) defaulted on the loan made to it. It was stated that there was no default so no debt arose. A letter from NAB dated 12 May 2014 was provided to confirm this.
The previous member requested an explanation regarding the note 11 in the financial statements suggesting that the financial liabilities included a loan secured in favour of Ms Jin Yao (the applicant). In response, the representative referred to the applicants and Q&Y’s account statements showing the transfer of a total of $490,000 by the applicants to Q&Y. It was submitted that funds transferred were by way of a loan and are for the purposes of the accounts described as secured. If for example the business were to be sold then that loan would be clawed back on the sale and not be calculated as a profit on the sale for the purposes of any capital gain. To that extent the loan is secured but it is not secured in the sense that there is any charge over the Company assets nor is it secured as it would be if the monies had been provided by an institutional lender. It was submitted that these arrangements are not uncommon in family businesses.
Also of relevance to the Tribunal’s considerations are the personal bank account records for Mr Minghai Zhang and his spouse which, in addition to showing the deposit of the $350,000 on 2 December 2010, also show a deposit of $100,000 on 6 December 2010. These deposits appear to correspond closely with the amounts and dates on which the applicants deposited funds into Q&Y’s accounts and the dates funds were withdrawn from Q&Y’s account.
The Tribunal has also had regard to the oral evidence of the applicant and her spouse when they appeared before the Tribunal (differently constituted). The applicant’s spouse gave evidence that they purchased 50% of the shares of Company. They paid $5,000 for shares, at $1 each, and paid that amount in cash. In addition, they purchased 50% of the $700,000 and this was paid at Westpac to the Company from their joint bank account. He suggested that this was a loan to the Company. He stated that for the petrol station they paid $350,000 for business and stock, but in addition paid $150,000 dollars. They originally got 30% of the shares but by the second year they had 50%, which they continue to hold.
When asked about the payments to other shareholders, he stated there was goodwill and stock valued at $700,000 when the other shareholder bought and when that person sold it to them, goodwill plus stock was valued at $1 million and they paid 50%. He was not sure how the other shareholder received the money and said that the shareholder made some money in the transaction but he and his wife were only focused on finding a business that they could use to migrate and guarantee them an income for life.

The member raised with the applicants the concern as to whether they can claim the purchase of half the business, as also a loan to the Company, such that in calculating assets that amount is being claimed twice. It noted that it is either a purchase of the business, or it is a loan, but it cannot be both. In response, the spouse stated that they had just arrived in Australia, their English was not good, and they found an accountant who suggested that this was how it should be done. He stated that the migration agent and the accountant communicated and determined to do it that way. He later explained that when the other shareholders purchased the business in 2008 for $700,000 they each paid half through the Company’s account.
In determining the total liabilities for Q&Y, the Tribunal has had regard to all of the above evidence as well as information in Q&Y’s balance sheets for the year ended 30 June 2009, 2010, 2011 and 2012.
In relation to the current liabilities as at 31 December 2012 and 31 December 2011, there is no issue with the amounts noted as ‘current tax liabilities’, though the Tribunal notes that on the audited reports this item was reclassified as trade and other payables.
In relation to the ‘current’ financial liabilities, nil was recorded as 31 December 2011 and $210,381 was recorded 31 December 2012. The delegate was concerned that this may be related to the NAB charge/loan of which no evidence was provided. The Tribunal is satisfied however, on the basis of the letters from the accountant and the NAB regarding the charge, that the amount $210,381 is not in any way related to a loan from NAB or the charge. The Tribunal accepts that the charge had no effect on the Company’s accounts and appears to have only been placed on the Company’s records by way of security in the event a default on a loan by another entity in which Mr Minhai Zhang had an interest. That charge was ultimately discharged on 11 October 2012 without consequence.
The audited financial reports record an adjustment to the amount for ‘current financial liabilities’ on the balance sheet as at 31 December 2011. So instead of a nil balance, as shown on the financial report initially relied on, it shows a balance of $231,106.[7] The auditor noted that they could not express any opinion on the valuation of unsecure other loans (as described in the notes for this item) as they were not provided with financial records prior to 31 December 2011. It is not clear why the auditors were not provided with earlier financial records given they had previously been provided to the Department and the Tribunal. The balance sheets for the 2009, 2010, 2011 and 2012 financial years show a generally decreasing balance of the ‘current’ financial liabilities: $380,138, $386,268, $282,937 and $210,606 respectively. The notes for this item on all the balance sheets consistently indicate that it is an ‘unsecured’ other loan. The Tribunal considers that the amount of $231,106 on the audited balance sheet to be more consistent with the balances shown in earlier financial reports and on this basis finds that the current financial liabilities (unsecured other loans) as at 31 December 2012 and 31 December 2011 were $210,381 and $231,106 respectively.
[7] Note 11: unsecured director loans other
Given the above, the Tribunal finds that the total current liabilities for Q&Y as at 31 December 2012 and 31 December 2011 were $222,435 and $232,735 respectively.
The Tribunal now turns to assess Q&Y’s non-current liabilities for the relevant periods. The audited reports again show an adjustment to the balance of the non-current financial liabilities (which in the notes are described as Director loan – Jin Yao) as at 31 December 2011, indicating that it was $ 490,000 and not $840,000 as indicated in the balance sheet provided with the visa application. The Tribunal notes that the auditor provides no qualification or opinion on the valuation of the non-current loan.
The delegate noted that earlier balance sheets showed a loan of $350,000 from Lingrong Zhou, which when added to the $490,000 paid by the applicants totalled $840,000. The delegate noted that no evidence had been provided to show repayment of the loan to Lingrong Zhou and found that the $350,000 should have also been included in the Company’s liabilities as at 31 December 2012.
Q&Y’s balance sheet for the years ended 30 June 2009 and 30 June 2010 showed a secured loan of $350,000 from Lingrong Zhou as a non-current liability. The balance sheet for the following financial year (30 June 2011) no longer included that loan, but instead included, as a non-current liability (described a loan from the applicant) for the amount of $440,000. In August 2011, the applicants made a further payment of $50,000 to Q&Y, bringing the total amount transferred to the Company’s accounts to $490,000.
The applicants have provided evidence that an amount of $350,000 was withdrawn from Q&Y’s account on 2 December 2010 and deposited into the account of Mr Minghai Zhang and his spouse. The Tribunal is satisfied on the basis of the letter from Ms Lingrong Zhang and her sister that the amount of $350,000 identified in the accounts as being a loan from Ms Lingrong Zhang has been repaid. Accordingly, the Tribunal accepts that the amount of $350,000 should not have been included in Q&Y’s non-current liabilities as at 31 December 2011 or 31 December 2012.
The Tribunal now turns to consider whether the $490,000 paid by the applicants to Q&Y is a loan to the Company. Before explaining the reasons for why the Tribunal does not accept that it was a loan, the Tribunal notes that in the circumstances of this case, this finding will not ultimately affect the applicants’ ability to meet the net asset requirement because the total liabilities of Q&Y, as calculated by the Tribunal, will not include the $490,000 thereby increasing the value of the Company’s net assets.
The term ‘loan’ is not defined in the Regulations and its ordinary meaning according to the Macquarie Dictionary (6^th edition) includes, ‘something that is lent or provided on condition of being returned, especially a sum of money lent at interest’. The Tribunal considers that if the $490,000 was intended to be a loan, lent on condition of being returned, then the agreement between the parties would have specified this. Instead, the agreement document signed by Mr Zhang, Ms Zhou and the applicants on 1 November 2013 states that after amicable negotiations there had been an oral agreement that the applicants made a “one-off investment of AU$350,000.00 to purchase shares in Q&Y Aust Pty Ltd”. The agreement between the parties indicates that the purpose of the payment by the applicants to Q&Y was for the purchase of shares in Q&Y from Mr Minghai Zhang and Ms Lingrong Zhou.
The Tribunal notes that the agreement only refers to $350,000 being the purchase of the shares. No mention has been made in that agreement about the remaining $140,000. The spouse’s evidence at the hearing however reveals that at the time they purchased the shares the business was valued at $1 million and that the original shareholders, from whom the shares were purchased, had made some money on their original investment of $700,000 for the business. This again suggests that the $490,000 paid by the applicants was for the purchase of 50% of the shares in Q&Y and reflected the valuation of the business operated by Q&Y at the time of the share purchases.
It is also interesting to note that the funds transferred by the applicants to Q&Y were promptly withdrawn and deposited into the account of Mr Minghai Zhang and his spouse. This occurred around the same time that the shares in Q&Y were transferred from Mr Minghai Zhang and Ms Zhou to the applicants. How the funds were deal with, in the Tribunal’s view, further confirms that the funds transferred by the applicants were for the purchase of shares from the original shareholders and was not intended to be a loan to Q&Y.
The Tribunal has had regard to the accountant’s letter explaining the reasons for why the $490,000 is recorded as a loan on the balance sheet. While it acknowledges that the treatment of the amount as a ‘loan’ and as an ‘asset’ in the balance sheet has nil effect in terms of the asset profile of the Company, it does not accept that funds paid into the Company’s account were available to it to operate the business. The transactions reveal that the funds were transferred through the Company’s accounts for the purpose of purchasing shares from Mr Minghai and Ms Zhou.
The Tribunal acknowledges that the funds were used to write down the ‘loan’ of $350,000 in favour of Ms Zhou which appeared in previous balance sheets for Q&Y and to write down the current financial liabilities (director loan) by about $100,000 which the Tribunal presumes is the record of Mr Minghai Zhang’s investment in Q&Y for the purchase of Metro. While on one view this may be considered as the Company using the applicants’ funds to write down its liabilities, and therefore available to operate the business, when considered it the context of all of the other evidence, it is apparent that the funds were put through Q&Y’s accounts as a means to purchase shares from the existing shareholders and not to operate the business as suggested.
The Tribunal has also had regard to the representative’s submission that the amounts paid by the applicants were recorded as a loan so that on sale of the business that amount would be clawed back and would not be calculated as a profit on the sale for the purpose of capital gains. The Tribunal also notes the applicant’s evidence at the hearing that they had simply followed their accountant’s advice about how to record the funds. The evidence suggests that the recording the funds on the balance sheet is a form of tax minimisation strategy which would allow applicants to first recoup their $490,000 investment in the business before declaring any profits on which tax would become payable. While this strategy may be a legitimate way to minimise the applicants’ tax, the Tribunal is not satisfied that for the purpose of migration the applicants’ payment of $490,000 can genuinely be characterised as a loan to the Company.
The Tribunal has also had regard to the applicant’s oral evidence that they paid $5,000 in cash for the shares in Q& Y and that the remaining amount was a loan. While the $5000 for 5000 shares in Q&Y may be the nominal value of the shares as recorded on the ASIC extract, the reality is that the business Q&Y operates has a much higher value, $1 million on the applicant’s own evidence at the hearing, and as such it would be difficult to accept that the parties intended that the applicants purchase shares in Q&Y for only $5000 and be entitled to 50% of the equity, and hence the profit, of the Company. Given the valuation of the business operated by Q&Y, the Tribunal considers the payment of $490,000 was for the purchase of 50% of the shares in Q&Y and was not a loan to the Company.
For all of the above reasons, the Tribunal finds that the $490,000 paid by the applicants was not a loan to Q&Y and does not form part of its liabilities for purposes of calculating the applicant’s net assets in the main business.
Give the above findings, the Tribunal calculates the net assets of the applicants in the business as follows:
31 December 2012                 31 December 2011
Total assets   $ 771,935   $ 760,202
Current liabilities:
Financial liabilities    $ 210,381   $ 231,106
Trade and other payables   $ 12,054       $ 1,651
Total current liabilities        $ 222,435   $ 232,757
Non-current liabilities:   -  -
Total net assets:  $ 549,500   $ 527,445
50% of net assets:  $ 274,750   $ 263,723
Given the above calculations, the Tribunal finds that the applicants’ share of the net assets in Q&Y is $ 274,750 and $ 263,723 as at 31 December 2012 and 31 December 2011 respectively. The Tribunal is accordingly satisfied that at the time of application the applicant and her spouse’s assets in the main business had a net value of at least $ 100,000 and had a net value of at least $ 100,000 throughout the period of 12 months ending immediately before the application is made. The applicants provided statements to the Department and the Tribunal detailing the history of their business activities in China and the source of the funds used to purchase the shares in the main business, which they indicated was in part from the sale of their business in China. The Tribunal is satisfied that the funds used to acquire an interest in the main business have been lawfully acquired by the applicant and her spouse.
Given the above, the Tribunal finds that cl.890.212 has been met.
The representative made request for the Tribunal to also consider making findings in respect of the other requirements for the grant of the visa in the event it found that the applicant had met cl.890.212 so as to minimise the processing delays before the Department. The Tribunal also notes that the representative has provided supporting documentary evidence to the Tribunal in respect of other criteria.
The Tribunal has considered the representative’s request, but considers more efficient for the Department to assess the remaining criteria for the grant of the visa. The Tribunal will however forward all of the submissions and supporting documents provided to it to the Department on remittal of this matter which the Tribunal considers will be of assistance to the Department in promptly assessing the remaining criteria for the visas.
Given the above findings, the appropriate course is to remit the application for the visas for the Minister to consider the remaining criteria for the grant of the Subclass 890 visas.
DECISION
The Tribunal remits the application for a Business Skills (Residence) (Class DF) for reconsideration, with the direction that the first named applicant meets the following criteria for a Subclass 890 visa:
·cl.890.212 of Schedule 2 to the Regulations
R. Skaros
Member

[2017] AATA 2493

24 November 2017

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Immigration

Administrative Law

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