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Federal Budget - Migration Planning Update

Australia Federal Budget 2020/21 – Migration Program Updates

Due to Covid-19 travel restrictions, the number of net overseas migration has been significantly affected in Australia. While net overseas migration was planned to be 271,300 this year, it is now expected to fall to just 35,000 in 2020-2021.

The Government is well aware of the positive impact which migration has on the Australian economy. The government has sought to address the impact which COVID-19 has had on the Australian economy by making some changes to the Australian Migration Program and Planning Levels. Below is a summary of the main factors that have been addressed in relation to Australian migration and the 2020 budget:

2020-2021 Migration Program Levels

The current cap of 160,000 will stay in place. However, there will be a focus on family stream visas with an increase from 47,732 places to 77,300. This will be applicable for the 2020-21 migration program only and can be expected to return to the lower cap next migration program.

Onshore visa applications and partner visa applicants whose sponsors live in designated reginal areas of Australia will be prioritised by the Department for the 2020-21 migration program.

The Employer Sponsored, Global Talent, and Business Innovation and Investment Program will have priority placed on the skilled streams for this year migration program.

Further information can be found at: https://immi.homeaffairs.gov.au/what-we-do/migration-program-planning-levels

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biz migrates

BUSINESS MIGRANTS BEWARE: Do you really have the ownership in the “Eligible Business”!?

This article will talk about the requirement that the business migrant must have “substantial ownership interest” in the “eligible business”.

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!

Writer:

KELVIN TANG is the Principal Partner of TANG Legal.   His areas of practice include Investment Law, Commercial and Corporate Law, Property Law and Immigration Law.  Relevant to this article, his experties, knowledge and experience include representing property developers and new migrants with acquisition of property, structuring of investment vehicle, joint venture transaction, and advice on commercial transactions.
Email:                     KT@TangLaw.com.au
Telephone:           +618 9328 7525