Zheng (Migration)

[2024] AATA 2613

Zheng (Migration) [2024] AATA 2613 (12 January 2024)

DECISION RECORD

DIVISION:Migration & Refugee Division

APPLICANTS:  Mr Weiping Zheng
Ms Hongjiao Lin
Mr Haochen Zheng
Mr Haojun Zheng
Mr Haoxiang Zheng

REPRESENTATIVE:  Mr Phillip Silver

CASE NUMBER:  2103195

HOME AFFAIRS REFERENCE:               BCC2018/3397707

MEMBER:Robyn Anderson

DATE:12 January 2024

PLACE OF DECISION:  Melbourne

DECISION:The Tribunal remits the applications for Business Skills (Provisional) (Class EB) visas for reconsideration, with the direction that the first named visa applicant meets the following criteria for a Subclass 188 (Business Innovation and Investment (Provisional)) visa:

·cl 188.225 of Schedule 2 to the Regulations.

Statement made on 12 January 2024 at 10.15am.

CATCHWORDS
MIGRATION – Business Skills (Provisional) (Class EB) visa – Subclass 188 (Business Innovation and Investment (Provisional)) – Business Innovation stream – ‘main business’ – ownership interest – direct and continuous involvement in management of the business – value of the ownership interests – ‘qualifying business’ – annual turnover requirement – decision under review remitted

LEGISLATION
Migration Act 1958 (Cth), ss 65, 134
Migration Regulations 1994 (Cth), rr 1.03, 1.11; Schedule 2, cl 188.225

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

STATEMENT OF DECISION AND REASONS

APPLICATION FOR REVIEW

1. This is an application for review of a decision made by a delegate of the Minister for Home Affairs on 25 February 2021 to refuse to grant the applicants Business Skills (Provisional) (Class EB) visas under s 65 of the Migration Act 1958 (Cth) (the Act).

2. The applicants applied for the visas on 7 September 2018. The criteria for the grant of a Subclass 188 (Business Innovation and Investment (Provisional)) visa are set out in Part 188 of Schedule 2 to the Migration Regulations 1994 (Cth) (the Regulations). The primary criteria must be satisfied by at least one applicant. Other members of the family unit who are applicants for the visa need satisfy only the secondary criteria. The primary criteria include common criteria, and criteria set out in streams. In this case, the first named visa applicant (‘the applicant’) applied for the visa in the Business Innovation stream.

3. The delegate in this case refused to grant the visas on the basis that the applicant did not satisfy the requirements of cl 188.225 of Schedule 2 to the Regulations. This criterion required the applicant to have had an ownership interest in one or more established main businesses that had an annual turnover of at least $500,000 for at least two of the four fiscal years immediately before the time of invitation to apply for the visas.

4. The Tribunal received a review application from the applicants on 14 March 2021. On 6 October 2023, the Tribunal wrote to the applicants via their representative to invite them to attend a hearing on 10 November 2023 by video conference. On 9 November 2023, the Tribunal received a submission from the applicant in respect of his direct involvement in the management of the nominated main business and updated information in respect of the nominated main business.

5. The applicants appeared by video conference before the Tribunal on 10 November 2023 to give evidence and present arguments on affirmation. The Tribunal hearing was conducted with the assistance of an interpreter in the Mandarin and English languages. The applicants’ representative did not attend the hearing. The Tribunal received oral evidence on affirmation from witnesses, Mr Hong Yu and Mr Yanqui Wang.

6. The Tribunal deferred making a decision in this matter to allow time for the applicant to provide further evidence. On 14 November 2023, the Tribunal wrote to the applicant and set out the additional information requested, as discussed at hearing. On 5 December 2023 and 11 December 2023, further information, submissions and financial documents were provided to the Tribunal.

7. For the following reasons, the Tribunal has concluded that the decision under review should be remitted for reconsideration.

   CONSIDERATION OF CLAIMS AND EVIDENCE

8. The applicant gave oral evidence that he first came to Australia in 2006 on a student visa to study language, where he met his now wife. They married and have since had three children.

9. The applicant told the Tribunal that he has worked in the construction industry for 17 years and established a good network. When he initially set up a plastering business, Mr Yu was working with him. They were working 25 to 28 hours per week while also assisting in caring for their respective young children. The applicant nominated ZY Plaster Pty Ltd as the nominated main business (the Business). The applicant’s submission states that the Business “mainly focuses on providing plastering and ceiling services, including all plasterboard wall and ceiling, suspension ceilings and demolition works etc.’.

10. According to ASIC records, the Business was incorporated on 30 June 2014. At that time, the applicant was the sole director and shareholder. The applicant told the Tribunal that by 2016, the jobs were increasing and it was necessary to seek out contractors and part-time employees.

11. Following incorporation, Mr Yu was an employee and continues to be so, albeit he took on 20% ownership of the Business on 17 September 2018. At the same time, the second named applicant (the applicant’s wife), took on 10% of the ownership, Chunyan Zheng, a business associate took on a further 10% and Silin Zheng took on 5% of the ownership of the Business. According to ASIC records, the applicant’s ownership reduced from 100% to 55% on 17 September 2018. On 14 July 2021, ASIC records reflect that the 5% shareholding held by Silin Zheng was transferred in full to Mr Yu, increasing his shareholding in the Business to 25%.

12. As noted above, cl 188.225 of Schedule 2 to the Regulations requires the applicant to have had an ownership interest in one or more established main businesses that had an annual turnover of at least $500,000 for at least two of the four fiscal years immediately before the time of invitation to apply for the visa.

13. According to departmental records, the applicant was invited to apply for the visa on 31 August 2018. For the purposes of this review, the two fiscal years being relied upon by the applicant are the years ending 30 June 2017 and 30 June 2018.

14. The first issue in considering the requirements of cl 188.225 of Schedule 2 to the Regulations in this case is in relation to whether the Business meets the definition of ‘main business’.

15. The meaning of ‘main business’ is set out in reg 1.11(1) of the Regulations (as defined in reg 1.03). In order for the Business to be considered a ‘main business’, reg 1.11(1) sets out four criteria. The criteria are not mutually exclusive and must all be met before a nominated business can be considered as the ‘main business’.

16. The first of the criteria under reg 1.11(1)(a) requires that the applicant has or has had an ownership interest in the business/es. Regulation 1.03 provides that ownership interest has the meaning given to it in s 134(10) of the Act. The definition of ownership interest in relation to a business, as relevantly defined in s 134(10) of the Act means, amongst other things, ‘a shareholder in the company that carries on the business’.

17. Based on the ASIC records discussed above, the Tribunal is satisfied that the applicant was the sole shareholder of the Business from incorporation on 30 June 2014 until 16 September 2018. He has continued to have an ownership interest in the Business, albeit it reduced to 55% from 17 September 2018. According to the most recent ASIC report, dated 12 October 2023, the applicant continues to have a 55% ownership in the Business. Therefore, the Tribunal finds that the first criterion in reg 1.11(1)(a) is met.

18. Secondly, the applicant must maintain or have maintained direct and continuous involvement in the management of the Business from day to day and in making decisions affecting the overall direction and performance of the business. It is this criterion that was the contentious issue with the Department.

19. The departmental guidelines, PAM3 GenGuide M – Business Visas (PAM3), to which the Tribunal may have regard in appropriate cases, sets out detailed guidance as to the meaning of maintaining direct and continuous involvement in the management of the business from day to day. While the Tribunal is not bound by policy, in Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60 the Full Federal Court held that a tribunal should take into account relevant government policy which is not inconsistent with the provisions or objects of the legislation. It is also noteworthy that there is judicial authority to the effect that the policy guidelines in PAM3 cannot go beyond the wording of the legislation, even where they are favourable to an applicant. In this case the Tribunal regards the policy as a useful guide to applying the legislation.

20. Essentially, after taking into account all of the circumstances of the case, the Tribunal must be satisfied that the applicant has been actively managing and operating the business by consistently spending a significant portion of his time managing the Business on an ongoing basis and making decisions affecting its overall direction and performance. Management involves planning, organising, directing and controlling the resources of a business. Departmental policy provides further details as to the meaning of planning and organising involving the setting of goals and strategies in relation to the future of a business and allocating resources and assigning tasks to enable those goals and strategies to be achieved. Directing and controlling the resources of a business involves the supervision of workers and the setting of appropriate standards for those workers to attain.

21. PAM3 also highlights the difference in the management role depending on the size of the business. The smaller the business the higher the expectation that the applicant would hold a dominant role and level of responsibility in relation to most facets of business operations, as opposed to significant delegation in a larger business. The policy goes on to state that for a business to be considered a ‘main business’ it is intended that the visa applicant would be involved in actively exercising their claimed management role.

22. The Tribunal notes that the information provided to the Department by the applicant was not relevant to supporting his claim of maintaining direct and continuous involvement in the management of the Business. Prior to hearing, the applicant provided a submission and information in support of his claim of maintaining direct and continuous involvement in the management of the Business to the Tribunal.

23. A statement was provided to the Department setting out the applicant’s duties as follows:

    ·Establishing and implementing policies, standards and objectives for the company;

    ·Overseeing and managing the daily operating of the company;

    ·Directing and endorsing policy to maximise profit and improve efficiency;

    ·Hiring and terminating staff to ensure that the company operates towards the company strategy and providing training to staff;

    ·Determining, planning and formulating governance policies, laws, rules and regulations;

    ·Negotiating with business partners and suppliers on behalf of the company;

    ·Monitoring and managing from start to end.

24. The applicant submitted to the Department that the rise in sales from $600,000 to in excess of $1m proves that the operating strategies and plans he has implemented have been successful and effective. He also outlined his future plans to further invest personally in the business and his projections in relation to further development and increased sales. However, none of the applicant’s statements were backed up by supporting documents.

25. Prior to the hearing, a submission from the applicant to the Tribunal stated that he personally manages the Business, juggling external responsibilities such as negotiating with partners (clients) coordinating projects and managing payments. Internally he oversees work allocation and progress at each job site. He also set out his typical daily duties. However, the supporting documentation provided to the Tribunal prior to hearing was largely in relation to a period after 30 June 2018 and was therefore not relevant to the issue at hand in relation to the relevant period of 1 July 2016 to 30 June 2018.

26. The applicant gave oral evidence that because he is known in the industry he doesn’t need to advertise. He further stated that he negotiates the terms of the contracts with clients and it is he who signs the agreements. Prospective clients approach him for a quote. If accepted, the job is completed and he issues an invoice. He further stated that he has a major client, Imation (owned by Mr Wang), for whom he provides regular services. He also provides services to some smaller clients. Mr Wang confirmed that his preference is to only deal with the applicant and that he pays by cheque.

27. In respect of financial records, the applicant gave oral evidence that he had previously employed an accountant. Since she ceased employment in March 2018, the applicant has been responsible for recording the hours relating to each construction site, paying the workers and providing information to an external accountant for the preparation of business activity statements and annual financial reports and taxation.

28. After the hearing, the applicant provided further documentation in respect of the relevant period and in support of his assertion that he has maintained direct and continuous involvement in the management of the Business from day to day and in making decisions affecting the overall direction and performance of the business.

29. Before the Tribunal were the following relevant supporting documents:

    ·a copy of the invoice for the purchase of a Toyota Hilux, dated 7 August 2017 and initialled and signed by the applicant in his capacity as director of the Business;

    ·numerous subcontract agreements between Imation and the Business, signed by the applicant in his capacity as director between May 2016 and June 2018;

    ·Commonwealth Bank Authority for Business Accounts recording the applicant and Mr Yu as the authorised signatories on the Business bank accounts, with any one of the two signatories authorised to operate the accounts since incorporation in 2014;

    ·Copies of invoices sent to Imation from the Business for the period 9 August 2016 to 19 June 2018. The invoices do not record a contact name;

    ·Copies of invoices sent to JAYF Interiors Pty Ltd from the Business for the period 29 June 2016 to 27 June 2018. These invoices record the applicant as director of the Business;

    ·Commonwealth Bank Business account statements highlighting payments received, including cheque payments from Imation and the corresponding invoices;

    ·GIO Workcover policy certificate of currency and premium calculation documents for the Business from October 2015 to 31 October 2017;

    ·I-care Workcover policy certificate of currency and premium calculation documents from 31 October 2017 to 31 October 2018 recording the applicant and his wife as the contact names of the Business;

    ·Quotes prepared by the applicant and sent to Imation for the period 10 March 2017 to 5 June 2018.

30. The applicant told the Tribunal that he organises the workers and checks that materials provided by the client are correct and sufficient to complete the job. Furthermore, the applicant and Mr Yu perform supervision roles on various work sites. The applicant completes all of the daily records for accounting purposes and signs the relevant financial reports and taxation documents prepared by the accountant. It is noteworthy that the applicant remains the sole director of the Business. Payments are made through electronic transfers, performed by either the applicant or Mr Yu.

31. Mr Yu gave oral evidence that initially he and the applicant worked together on site as the plastering jobs generally require two people. When business increased he also assisted the applicant by supervising contractors/employees on site while the applicant was at other sites. He also passes on information in respect of working hours at the sites he is on to the applicant on a daily basis. It is the applicant who collates and records all of the information. Mr Yu stated that he works 20 to 25 hours per week while also assisting in caring for his three young children.

32. According to financial statements of the Business in 2016/17 and 2017/18, the applicant has drawn funds from the Business. However, in later years funds have been injected into the Business through a director’s loan. That is, the funds have been injected into the Business as a loan from the applicant, the sole director. In the year ending 30 June 2022, the director’s loan credit balance was $417,684 and by 30 June 2023 had reduced to $368,964. This aligns with the submission to the Department in 2018 that referenced a plan for the applicant to inject funds into the Business in the vicinity of $500,000.

33. Overall, while the applicant has clearly been assisted by Mr Yu, based on the evidence before it the Tribunal is satisfied that the applicant retained overall control of all aspects of the operations of the Business on a day-to-day basis and made the decisions impacting the direction and performance of the business operations. Therefore, the second criterion in reg 1.11(1)(b) is met.

34. Thirdly, the value of the applicant’s ownership interest, or the total value of the ownership interests of the applicant and the applicant’s spouse or de facto partner in the Business must meet certain thresholds. As the Business is not operated by a publicly listed company, the required ownership interest must be at least 30% if the annual turnover is greater than or equal to $400,000 and at least 51% if the annual turnover is less than $400,000. In this case, as the applicant owned 100% of the shares of the Business in the relevant period and he and his spouse have had a combined shareholding of 65% since 17 September 2018, the third criterion in reg 1.11(1)(c) is clearly met, regardless of the turnover.

35. Finally, the Business must operate a qualifying business. Qualifying business is defined at reg 1.03 of the Regulations to mean ‘an enterprise that is operated for the purpose of making profit through the provision of goods and/or services (other than the provision of rental property) to the public and is not operated primarily or substantially for the purpose of speculative or passive investment.’

36. Based on the financial statements provided, the Business recorded a net profit before tax in the 12-month period ending 30 June 2017 in the amount of $1,774 and in the 12-month period ending 30 June 2018 in the amount of $27,375. The financial statements in respect of the period ending 30 June 2022 and 30 June 2023 record a net loss of $38,996 and a net profit of $37,026 respectively. The Tribunal is satisfied that the Business has been operated for the purpose of making a profit.

37. While the Tribunal notes that Imation has provided the bulk of the work the Business was contracted to perform during the relevant period, it is evident JAYF Interiors Pty Ltd and some other smaller jobs were also accepted by the Business. The applicant gave oral evidence that it is only the smaller jobs that require the purchase of materials. The Tribunal is satisfied that the Business provides goods and/or services to the public in the form of plastering services through networking in the industry. The Tribunal is also satisfied that the services offered by the Business are not for the purpose of speculative or passive investment.

38. Therefore, as the Tribunal is satisfied that the Business was operated for the purpose of making a profit through the provision of goods and/or services (other than the provision of rental property) to the public and was not operated primarily or substantially for the purpose of speculative or passive investment, it finds that the Business was a qualifying business in the relevant period, thereby satisfying the criterion in reg 1.11(1)(d).

1. As all four criteria under reg 1.11 are met, it follows that the Business is a main business for the purposes of cl 188.225 of Schedule 2 to the Regulations and the Tribunal finds accordingly.

2. Clause 188.225(1) of Schedule 2 to the Regulations requires that for at least two of the four fiscal years immediately before the time of invitation to apply for the visa, the applicant has had an ownership interest in one or more established main businesses that had an annual turnover of at least $500,000 in each of those years.

3. The Tribunal has found above that the Business met the definition of main business throughout the relevant period of 1 July 2016 to 30 June 2018. As discussed in paragraph 17 above, the Tribunal found that the applicant was the sole shareholder of the Business from 30 June 2014 to 16 September 2018 and since 17 September 2018 has retained 55% ownership of the Business. Consequently, the Tribunal finds that he has held an ownership interest in the Business, as the nominated main business, throughout the relevant period.

4. The financial statements of the Business reflect an annual turnover in excess of $1m in the years ending 30 June 2017 and 30 June 2018. The recorded sales align closely to the deposits recorded in the CBA Business bank statements that are before the Tribunal for the corresponding periods. The Tribunal is satisfied that the annual turnovers clearly exceed $500,000 in both the nominated fiscal years and so finds.

5. As the main business was not engaged in the provision of professional, technical or trade services, cl 188.225(2) is not applicable for this review. Accordingly, the Tribunal finds that the applicant meets the requirements under cl 188.225 of Schedule 2 to the Regulations.

6. Given the above findings and the representative’s preference, as advised after the hearing, to remit the application to the Department for consideration of the remaining issues, the Tribunal considers that the appropriate course is to remit the application for the visa to the Minister to consider the remaining criteria for a Subclass 188 (Business Innovation and Investment (Provisional)) visa.

7. The Tribunal finds that as the second, third, fourth and fifth named applicants applied on the basis of being family unit members of the first named applicant, their applications will be determined by reference to the outcome of the first named applicant’s application on remittal to the Department for reconsideration.

   DECISION

8. The Tribunal remits the applications for Business Skills (Provisional) (Class EB) visas for reconsideration, with the direction that the first named visa applicant meets the following criteria for a Subclass 188 (Business Innovation and Investment (Provisional)) visa:

   ·cl 188.225 of Schedule 2 to the Regulations.