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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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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.

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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



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business-visa

Can Property Investment be an “Eligible Business” for Business Visa in Australia?

Can Property Investment be an “Eligible Business” for Business Visa in Australia?

I am often asked by new and perspective business migrants on whether they can invest in property for the purpose of satisfying the Australian Business Visa requirements.  The good news is that it is possible. Investment in property may [emphasized] meet the migration requirements.  
 
I must emphasize 2  important points: (1) Passive investment (and more specifically, provision of rental properties to the public) and smaller “project” based property development will NOT meet the migration requirements; and (2) Even if the migrant’s proposed business in property investment meets the State’s guidelines in bringing in substantial and exceptional benefits and thus obtained nomination by the State or Territory, this itself does NOT automatically mean that the Commonwealth migration requirements are met.  
Under the Commonwealth migration regulations, a business migrant must satisfy three (3) conditions under the Act: (1) The business proposed or carried on by the migrant must be an “eligible business”; (2) The migrant must have obtained a substantial ownership interest in the eligible business; and (3) The migrant must actively participate at a senior level in the day-to-day management of the eligible business.  If the migrant fails to satisfy these requirements, the Minister may cancel the visa.  Hence, business migrant, please BEWARE!
This article briefly examines the “eligible business” requirement.   In the case of Zhonghua v Minister for Immigration and Citizenship (BC201102754), the migrant, holder of sub-class 132 Business Talent visa, invested AUD$3,000,000 into a property development project. There were submissions by the migrant that application to re-zone the property was made to develop apartments.  However, the Tribunal found that the investment did not pass the initial stage of purchasing the land.  No actual development has taken place other than owning the land and making application to re-zone the land.  For this reason, it cannot be described as a business.  As such, the migrant’s investment did not satisfy the “eligible business” definition. However, what is important from this case is that in the judgment, the following comment was made by the presiding Senior Member, Mr Egon Fice: “… if the development proceeds, it might satisfy the eligible business definition in that it might create or maintain employment in Australia or result in commercial activity and competitiveness within sectors of the Australian economy.”
 
Further, under the case law, the test of what constitutes an “eligible business” requires more than just satisfying the conditions under the migration regulations.  The Courts require that the business has repetitiveness of activities and some permanence characteristicsPuzey v Commissioner of Taxation [2003] FCAFC 197.
For the professionals who assist business migrants with their investment (such as migration agent, accountant, and real estate agent), you should find this article beneficial or at least relevant.   Australian Courts have strict expectations that the requisite standard of care is met and professionals could be found personally liable for negligence or wrongdoing if the standard is not met.  Here is a thought:  What do you need to do (or must not omit to do), in order to meet the requisite standard of care? 
 
For businesses seeking investment capital from the business migrant (for instance, property development company), beware of “representations” (such as statements and forecasts) that you make to the investor, buyer or migrant.   If your representations are subsequently found to be false, even if it was not your intention to lie, you can be liable for damages for having engaged in “misleading or deceptive conduct” under the Consumer Act.  This is a huge exposure to liability. 
 
There are also cases where migrants have failed the “substantial ownership” requirement due to technical difference between legal ownership interest and beneficial interest.   The ownership structure of the project company is extremely important.  My next article will examine the ownership issue in more details.

Writer:

KELVIN TANG is the Principal Partner of Tang Law.   His areas of practice include Investment Law, Commercial and Corporate Law, Property Law and Immigration Law.  Relevant to this article, his expertise, 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