The general rule to meet this substantial ownership requirement is that if the business turnover is less than AUD$400,000, fifty-one percent (51%) is required.  If more than AUD$400,000, thirty percent (30%) is required.  If the business is a listed company, at least ten percent (10%) is required.   This is the simple part.  The complicated part is where a business is owned by a trustee company of a trust.  It is quite common in Australia that investments and businesses conducted through a trust vehicle. There have been past cases where migrants have failed the “substantial ownership” requirement due to legal technical difference between ownership interest and beneficial interest.

Section 134(1) of the Migration Act provides that “ownership interest” includes interest in the business as a shareholder in a company that carries on the business, a partner in a partnership that carries on the business, or a sole proprietor.  This definition seems simple enough, but in reality, it is not as simple as it seems.

But what about a trust structure?   Trust has many forms – fixed or unit trust, discretionary trust, special purpose trust, bare trust and hybrid trust.   How do you know your “ownership” meets the migration requirements?

Let’s take for instance the business is carried on through a unit trust and the migrant owns units in the unit trust.  I must emphasis that many property development projects are conducted using unit trust.  As a unit holder, you may have certain legal entitlements.  But does this satisfy the “substantial ownership” requirement?  The answer is, NO!  As a unit holder of a unit trust, you merely have a beneficial interest in the “eligible business”, NOT a legal ownership interest.  The Court in the Zhonghua’s case (which we looked at last week) found that having beneficial interest as a beneficiary of a trust does not meet the “substantial ownership” requirement.   

Now, let’s consider the flipside and say you own shares in the trustee company but the trust is a discretionary trust, or more commonly known as a family trust, where you do not have any fixed entitlements? In fact, under a discretionary trust, the beneficiary only has a “mere hope or expectancy” to receive benefits from the trust asset, there is not definite entitlement to distribution.  In this instance, even if the migrant has shareholding in the trustee company, will the migrant still meet the “substantial ownership” test?  A further question for business migrant to consider – although you may be a shareholder of a company, how do you know whether the company is actually a trustee company of a discretionary trust?  This is problematic.

The migration regulations may appear straight forward, but in reality, it may not be as straight forward as it seems.   Please beware of legal technicality!

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