Importance of recent Federal Court decision Pearson v Minister for Home Affairs [2022] FCAFC 203

Under Section 501(3A) of the Migration Act 1958 (Cth)(“Act”), a visa holder is subject to mandatory visa cancellation if:

  1. The person does not pass the character test because of the operation of:
    1. paragraph (6)(a) (substantial criminal record), on the basis of paragraph (7)(a), (b) or (c); or
    2. paragraph (6)(e) (sexually based offences involving a child); and

 

  1. the person is serving a sentence of imprisonment, on a full‑time basis in a custodial institution, for an offence against a law of the Commonwealth, a State or a Territory.

A “substantial criminal record” on the basis of paragraph (7)(a), (b) or (c) of the Act is where a person has been sentenced to death (7)(a), imprisonment for life (7)(b), or a term of imprisonment of 12 months or more (7)(c).

Until the Pearson judgment was handed down on 22 December 2022, an aggregate (combined) sentence of at least 12 months’ imprisonment has triggered mandatory visa cancellation.

Pearson v Minister for Home Affairs [2022] FCAFC 203

The Full Court’s decision in Pearson v Minister for Home Affairs [2022] FCAFC 203 found that an aggregate sentence of imprisonment of at least 12 months did not constitute a ‘term of imprisonment of 12 months or more’ and therefore would not result in a mandatory visa cancellation under s 501(3A) of the Act.  

The Full Court’s reasoning behind this is that mandatory visa cancellation should only be enlivened for the most serious offences, such as those attracting the death penalty, life imprisonment, a term of imprisonment of 12 months or more for a single offence, or sexual offences involving children. The Full Court held the view that the mandatory cancellation was “reserved for the most serious offences”.

Moreover, the Full Court also found that an aggregate sentence itself says ‘little to nothing about the seriousness of the individual offences’.

Consequences

The Pearson decision set a precedent that mandatory visa cancellation is not enlivened when the sentence imposed is an aggregate sentence of imprisonment of 12 months or more. The consequences of the decision made in Pearson case are substantial and there are reports that up to 100 people have been released from immigration detention since the decision.

However, the Migration Amendment (Aggregate Sentences) Bill 2023 was introduced to clarify that s501(7)(c) applies in relation to a person sentenced to a term of imprisonment of 12 months or more, whether the sentence is imposed for a single offence or for 2 or more offences.

This Bill was passed through both Houses of Parliament on 13 February 2023 and will receive Royal Assent shortly, effectively undoing the precedent set in Pearson.

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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:                     [email protected]
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:                     [email protected]     
Telephone:           +618 9328 7525