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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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WHAT YOU NEED TO KNOW BEFORE INVESTING IN AUSTRALIA?

Overview

I begin with looking at the general trend we are now experiencing in Australia:

  • The Australian currency has dropped significantly compared to its peak in 2012/2013.  This makes the Australian assets significantly “cheaper” to acquire for foreign investors.
  • Recently, there is a trend of investors chasing investment with good returns as deposits around the world are not attracting good interest.  In Australia, our cash rate is at record low of 1.5%.
  • There have been significant increases in interests in Australia agricultural land as the world’s demand for food increases.

Combining these factors, it is no surprise that Australia assets are particularly attractive, especially agricultural land.

Adding to these factors, the State Government of Western Australia and Queensland have made loosen their nomination requirements.  It is now much easier for potential business migrant to obtain State support from Western Australia

There may be many reasons why you should invest in Australia, BUT what do you need to know before you invest in Australia?

Australia Consumer Law

You would have looked around trying to find sound and safe investment.  You may have been given a lot of information by the seller or broker.  The seller will tell you that the business is profitable.  They may even promise you that you will fetch very high return on investment.   The seller may even be prepared to give you a “guarantee”.   But if the business or the assets are performing so well, then you need to ask the question, why are they selling it to you? Is it true that the business is very profitable? Can the investment generate such high return? Is the “guarantee” worth anything? You must take steps to verify this information.  The seller is prohibited from giving false information under the Australian Consumer Law.  Failure to disclose material information can constitute misleading conduct under the Australian Consumer Law.  As a buyer or an investor, you need to ask the relevant factual questions, do your checking and due diligence, and if information given to you is an opinion (as opposed to a fact), it needs to be qualified.

Foreign Investment Review Board

If you are a foreigner looking to acquire assets in Australia, you may be required to first obtain FIRB approval.  There are serious consequences for failing to comply with the FIRB requirements. Penalties will be imposed and you may be required to dispose of the asset.

Your sale and purchase contract must state that it is subject to FIRB approval, failing which your contract is actually unlawful and unenforceable.  As a foreign investor, you are also required to enter your interest in the land register.  Please beware, these requirements are mandatory!

Sale and Purchase Contract

In Western Australia, the sale and purchase contract for land is standardised and it is commonly known as “Contract for Sale and Purchase of Property by Offer and Acceptance”.

The practice is that as buyer, you make a written offer.  But did you know that once your written offer is accepted by the seller, a formal contract is immediately formed and your “written offer” becomes a formal binding contract!  The written offer is not merely a document to express your purchase price.  Be aware, it is in fact a legal document!

Moreover, in Western Australia, there is no “cooling off” period.   Once a contract is formed, you are under contractual obligations to perform.

Controlling Rights

The best way to protect your investment is to have control over it.  You may have invested millions of dollars into a company and you own the assets, but how much control do you have over your investment if you do not have the management rights?  As a shareholder of a company, you actually have very limited control over the affairs of the company as it is managed by board of directors (not shareholders)?

Before you invest, you need to consider how to structure the investment transaction so as to preserve your control over your capital.

Taxation Issues

The tax system in Australia is very comprehensive and highly complex.  Before you invest, you should obtain tax advice from accountants to avoid adverse implications. Plan your tax ahead!

The Spirit of Contracts

In Australia, we respect contracts.  It is not just a piece of paper.  It is the parties’ legal rights and obligations. Litigation in Australia is very common when a party breaches the contract.

Do not simply sign on legal documents or make promises.  Once you make a contractual promise, you will need to deliver your promise.   It would be wise to get legal advice before you lock yourself into a contract to invest.

Australia legal system is comprehensive, mature and highly complex.   Be aware and respect the law!


ABOUT THE WRITER

Kelvin has over 14 years’ experience practising law in Western Australia. He is the founder and Principal Partner of Tang Law based in Perth, Western Australia. Kelvin is a Registered Migration Agent (MARN: 1386452) and has extensive experience in providing service on Commercial Law, Dispute Resolution & Litigation, Family Law, Wills & Estate Planning and Settlements.

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HOW TO DEMONSTRATE “BUSINESS SKILLS” FOR AUSTRALIAN BUSINESS MIGRATION PURPOSE

Basic Requirements

To qualify for business migration, generally speaking, you must be able to demonstrate that you have the requisite business skills.
Under the migration policies, the Immigration Department will assess you on:
  1. Your overall successful business career; and
  2. Your direct and continuous management involvement

Overall Successful Business Career

The migration policy intention is to measure the business performance of your entire business career, including any business activities that pre-date the assessment period.  Be aware that the Department may assess ALL businesses that you have had a management role.

Factors considered by the Department in conducting the assessment include:

  1. Financial position of your business – whether it has been making trading profits or losses.
  2. General trend of your business revenue – is it upward or downward trend.
  3. Whether the business likely to be successful in the longer term, looking at the potential to increase profitability, market share, business growth and/or competitive advantage.
  4. If your business recorded losses, you must provide details of relevant factors leading to the loss, such as:
  5. External economic trends
  6. Fall in property values
  7. Drop in world commodity prices
  8. Changes in taxation regime
  9. Recent acquisition of assets

You will NOT pass this criterion if your business has suffered recent trading losses and the business is consideredunlikely to be successful in the longer term due to your role and decision-making in the business.

Direct and Continuous Management Involvement

You are required to demonstrate that they have had direct and continuous involvement in management of the business from day to day and in making decisions affecting the overall direction and performance of the business.

Direct involvement in management

Direct involvement requires an applicant to be in charge of managing the whole or part of a business according to the size of the business.

If the main business is a small business with no or few employees it is expected that the applicant has a dominant role and responsibility for managing the business.

In the case of a larger business, you may not hold responsibility for a principal or dominant role, but it is necessary that you have been directly involved in managing at least one facet of a main business.  If there is more than one person who might have responsibility for managing the business it is necessary to define the management role of the applicant.

“Management” involves planning, organising, directing and controlling the resources of the business.

  • “Planning” includes setting the goals of the business, developing strategies for achieving the goals and determining the standards or quality.
  • “Organising” refers to the way the business allocates resources, assigns tasks, and goes about meeting its goals. In the process of organising, managers arrange a framework that links all workers, tasks and resources together so the business goals can be achieved.
  • “Directing” is supervising or leading workers to accomplish the goals of the business.
  • “Controlling” is the process of determining if the goals and objectives of the business are being met, setting performance standards for workers and monitoring their performance against standards.

Continuous involvement from day to day

You are expected to consistently spend a significant portion of your time managing the business on an ongoing basis from day to day. For a business to be considered a ‘main business’ it is intended that you would be involved in actively exercising your management role:

  • without any significant or frequent breaks in their management involvement
  • without any significant or frequent gaps in the activities of the business and
  • on any ordinary business day.

Decisions affecting the overall direction and performance of the business

You need to demonstrate that you were involved in making decisions affecting the overall direction and performance of the business. For example:

  • Establishing the business goals, market position, and competitive edge.
  • Method of sales distributions
  • Determining or creating business products and services
  • Setting up management structure and operational plan for efficient monitoring
  • Solving problems with complaints
  • Contingency planning for unforeseen circumstances

Assessment by the Department

If the Department has any doubt in relation to your management, additional scrutiny will be undertaken to determine the true nature of your management role in the business.

The case officers in charge of handling your application may:

  • refuse the visa
  • request further evidence
  • arrange an interview for you (in person or by phone). An interview may test whether you appear to have a full understanding of how the business operates, the duties you undertakes and the level of responsibility held.
  • A site visit may also be undertaken.

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ABOUT THE WRITER

Kelvin Tang has close to 20 years’ experience practising law in Australia. He is the founder and Principal Partner of Tang Law based in Perth, Western Australia. Kelvin is a Registered Migration Agent (MARN: 1386452) and has extensive experience in providing migration advice to clients, advising on “Eligible Businesses” within the definition of the Migration Regulations, assisting migrants (investor of the business) with satisfying migration requirements, making visa applications and appealing cancelled or refused visas in the Federal Court of Australia, Administrative Appeals Tribunal and Migration Review Tribunal. Kelvin also has extensive experience in civil litigation, commercial and corporate law matters.