Some Pathway Planning

The psychology of advocacy can never be ignored, ie the feel of the case.

Business visa clients ought to have connections with Australia, like membership of the local Australian chamber of commerce, a history of some exploratory visits to Australia, some preliminary transactions, Australian business contacts, ie things which indicate the implementation of a genuine desire to do business with Australia and of course a reasonable knowledge of English. Having done a business English course would be an advantage. Also of advantage would be documented and recorded meetings in Australia with a bank, a lawyer, an accountant, insurers, real estate agent, investigations of possible premises, identifying a ‘guardian angel’ in Australia who might be an anchor point for future business help, having a post box or a serviced office connection, sim card with an Australian telephone number, documented meetings with local and state authorities, a business card in English with some of these details. All business applicants should have done one of the official English tests. If it is a poor result it does not have to be used. . A good result will be a great advantage (a good result would be consistent 4’s in the IELTS). Having attended a conference in Australia on the field of business the applicant has experience or skills in would be an advantage. Not over doing it but joining a local relevant organization is another indication of genuineness. An applicant ought to have some concrete ideas as to what business he or she will do in Australia, this should be recorded. A cold case client always creates an initial negative impression which can infect the rest of the considerations.

Authenticity and proper proof of everything

Related to the previous issue is authenticity. Unfortunately given the pervasiveness of fraud across many areas of migration law, including business visas, authenticity and proper proof of everything is essential. Anyone preparing a business visa application should prove things as if the applicant was in court. Every single assertion has to be backed by incontrovertible evidence and if necessary notarized. Asserting one has shares in a particular company will not be believed without proper unassailable proof.

As discussed elsewhere in this paper, source of funds is a perennial issue. An applicant has to show that the funds have been lawfully acquired. Often the writer sees loss making companies being the source of funds. A business which is running up consistent losses or minimal profits will not create the necessary ambiance for a successful business visa application. The whole purpose of the business visa regime needs to be taken into account. It is about bringing successful business people to Australia for the purpose of doing business in Australia and improving the Australian economy. Evidence of a loss making business or a poor business creates an immediate bad taste. The last year of financial results ought to be excellent. It may mean all concerned putting an extra effort in the 18 months or so before lodging an application, then that just has to be done. If poor financial figures are caused by saving tax then the saving of tax will often mean the visa is not granted. Losses or low profits have to be explained. It is probably fair to say that an efficient tax structure and successful business migration to Australia are incompatible.

Anything unusual needs to be explained. For example if the funds are transferred via a separate or unrelated entity then that needs to be fully explained. The existence of any extraneous material needs to be fully explained.

Hence planning does not take place at time of application, a good business visa application may need to be planned over a considerable time into order to position the client to make the best possible application, both to enhance positives and to minimize or remove negatives (the writer calls the latter ‘panel beating’).

Having the client in Australia for the business visa application

In order to activate merit review rights the client must generally be in Australia at time of application (with some exceptions). Everything must be done therefore to have the client in Australia at that time.

In order to avoid 8503, it may be necessary therefore for the client to have some history of coming to Australia for business purposes, further enhancing the notion that successful a business visa process takes time and that the insurance policy of having merit review rights in place is essential.

Most state and territory authorities will not support a merit review application which means that if the business visa applicant is not in Australia then for all practical purposes there are no merit review rights.

Some basics

While the law does not mandate that the primary applicant be a director of the company which the vehicle for conducting the business, in practice it is essential that the primary applicant be a director of that company. Preferably both the primary applicant and the spouse ought to be directors. Ordinarily it is useful for any adult offspring to be directors as well. Obviously the applicant needs to be a shareholder in the company which is the basis of a business visa application.

Accompanying this paper are guidelines for applicants from China. Some of the material in those documents is China specific, like the requirement for an audit :

As a result of the above, applications based on PRC business or investment activities must include reports prepared in accordance with either International Standard on Review Engagements (‘ISRE’) 2400 Engagements to Review Financial Statements (a review report) or International Standard on Related Services (‘ISRS’) 4400 Engagements to Perform Agreed-Upon Procedures regarding Financial Information (a special purpose report), as applicable. These standards replaced ISA 910 and ISA 920 respectively and are the responsibility of the International Auditing and Assurance

Standards Board (for more information see www.ifac.org/IAASB).[2]

In relation to any applications from developing countries or countries with economies in transition, some type of limited audit is useful. Therefore the guidelines from the Hong Kong Consulate regarding the processing of business visas is good reading and it would be useful adapting those guidelines for other countries in order to meet integrity issues. Of course for China applicants following the HK guidelines to the letter is essential.

Essential practice point

People who do not have experience with the Australian law often do not formalize transactions through written and signed documents nor through proper registration of documents, to give effect to a transaction.

A check must be done that all such transactions and documents are in place to evidence what is required to meet the criteria for the relevant business visa. Sometimes people make investments even substantial investments on a handshake[3]. Ordinarily this is not regarded as evidence for purposes (see Reg 1.11A and the discussion below). Contracts do not have to be long and complex to have legal efficacy. A simple written legal contract signed and dated by the parties carries a lot of weight in contrast to a handshake or an informal oral agreement. (The writer can assist on a fee basis in the drafting of any such contracts.)

Obvious evidence of involvement in a business like being a signatory to the relevant business bank accounts over the period of claimed involvement in a business would be essential.

Before embarking on any business visa pathway migration advisers need to do a check and audit of the company share register, directorship structure and bank account authority history. First start with an historical ASIC company search. The writer uses the service called Citec Confirm for this – http://www.confirm.com.au/citecConfirm/index.shtml

But there are many other such on-line services[4], it costs under $40 to do such a search.

It is surprising how often it is that a visa applicant has not been a shareholder or director or bank account signatory over the relevant period.

State or territory sponsorship – practice point

Whenever state or territory sponsorship is required, always ensure that each spouse is separately and independently sponsored. Sometimes if the principal spouse does not meet the criteria a rescue strategy could be having the other spouse meeting the criteria. The criterion that is sometimes missed is the residence requirement in the transition from temporary to permanent residence and if both spouses have been sponsored then the other spouse who may meet the residence criterion can be the main applicant. Such sponsorship ought to be place prior to the visa application is lodged.

Trade Marks – Practice point

Item 7A92 in the business visas points test gives 10 points for the following:

the applicant, or a main business of the applicant, had one or more registered trade marks that:

(a) were registered not less than 1 year before that time; and

(b) were used in the day to day activities of the main business

The points test is a time of decision criteria so that to gain these points the visa applicant’s business had to have a trade mark in place at least one year prior to time of decision and used that trade mark in that business.

Registering a trademark is relatively easy. It can be just a simple graphic design with associated words. Or it could be a made up word like ‘Smithbuild’ or indeed anything. It cannot be a common word. For example one could not register the word ‘cola’ but obviously ‘Coca-cola’ is a registered trademark.

Properly planned in advance this could be an easy 10 points for a client to obtain.

The business points test threshold is 65 points and every 10 points helps.

(The writer can assist, for a fee, in selecting and registering a trademark)

Some definitions

All of the following definitions have to be clearly understood.

S 134(10) of the Migration Act states:

ownership interest in relation to a business, means an interest in the business as:

-(a) a shareholder in a company that carries on the business; or

(b) a partner in a partnership that carries on the business; or

(c) the sole proprietor of the business;

including such an interest held indirectly through one or more interposed companies, partnerships or trusts;

Reg 1.03 states:

qualifying business means an enterprise that:

(a) is operated for the purpose of making profit through the provision of goods, services or goods and services (other than the provision of rental property) to the public; and

(b) is not operated primarily or substantially for the purpose of speculative or passive investment.

It should be noted here that the business does not actually have to make a profit but has to be set up for the purpose of making a profit, so a business could actually be making a lost but can be still ‘operated for the purpose of making profit’. A curious limitation of part of this definition is the part saying ‘through the provision of goods, services or goods and services….to the public’. Does this exclude ‘business to business’ suppliers? The writer thinks not as ultimately one may be able to show that the company’s clientele is a public which includes businesses or that what the business does is part of the chain of supply to the public.

Just buying rental property is excluded from the definition but accommodation services are not excluded. One considers that a business providing serviced apartments would not be rental property.

The other limitation is not being for ‘speculative or passive investment’. If real property or owning shares is the main function or asset of the business some care needs to be taken to structure the business so that is has a momentum of its own. By way of example a business which purchased land, designed and constructed buildings (apartments or otherwise) for sale would not be ‘speculative or passive’.

The government essentially does not wish to encourage real property or share market speculation through the business visa regime.

Reg 1.11 Main business

(1) For the purposes of these Regulations and subject to subregulation (2), a business is a main business in relation to an applicant for a visa if:

(a) the applicant has, or has had, an ownership interest in the business; and

(b) the applicant maintains, or has maintained, 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; and

(c) the value of the applicant’s ownership interest, or the total value of the ownership interests of the applicant and the applicant’s spouse or de facto partner, in the business is or was:

(i) if the business is operated by a publicly listed company—at least 10% of the total value of the business; or

(ii) if:

(A) the business is not operated by a publicly listed company; and

(B) the annual turnover of the business is at least AUD400 000;

at least 30% of the total value of the business; or

(iii) if:

(A) the business is not operated by a publicly listed company; and

(B) the annual turnover of the business is less than AUD400 000;

at least 51% of the total value of the business; and

(d) the business is a qualifying business.

(2) If an applicant has, or has had, an ownership interest in more than 1 qualifying business that would, except for this subregulation, be a main business in relation to the applicant, the applicant must not nominate more than 2 of those qualifying businesses as main businesses.

Some issues to observe here. In the past there was some history of multiple families using a very small business to gain business visas for each family. Reg 1.11(1)(c)(iii) only permits one family to obtain business visas if the turnover of the business is less than $400,000, thus the business has to be 51% owned by the applicant and/or spouse.

However an annual turnover of more than $400,000 is not large in any sense and it would be theoretically possible for 3 families each having a 30% interest in the business, to use the one business to meet the ‘main business’ definition even with a 10% interest held by an Australian participant.

Reg 1.11A Ownership for the purposes of certain Parts of Schedule 2

(1) Subject to subregulation (4), for Parts 132, 188, 888, 890, 891, 892 and 893 of Schedule 2, ownership by an applicant, or the applicant’s spouse or de facto partner, of an asset, an eligible investment or an ownership interest, includes beneficial ownership only if the beneficial ownership is evidenced in accordance with subregulation (2).

(2) To evidence beneficial ownership of an asset, eligible investment or ownership interest, the applicant must show to the Minister:

(a) a trust instrument; or

(b) a contract; or

(c) any other document capable of being used to enforce the rights of the applicant, or the applicant’s spouse or de facto partner, as the case requires, in relation to the asset, eligible investment or ownership interest;

stamped or registered by an appropriate authority under the law of the jurisdiction where the asset, eligible investment or ownership interest is located.

(3) A document shown under subregulation (2) does not evidence beneficial ownership, for subregulation (1), for any period earlier than the date of registration or stamping by the appropriate authority.

(4) Beneficial ownership is not required to be evidenced in accordance with subregulation (2) if the person who has legal ownership of the asset, eligible investment or ownership interest in relation to which the applicant, or the applicant’s spouse or de facto partner, has beneficial ownership:

(a) is a dependent child of the applicant; and

(b) made a combined application with the applicant; and

(c) has not reached the age at which, in the jurisdiction where the asset, eligible investment or ownership interest is located, he or she can claim the benefits of ownership of the asset, eligible investment or ownership interest.

Just what is a ‘document capable of being used to enforce the rights of the applicant’? This may give this provision some flexibility. A cheque being the basis of which an investment was made would be sufficient as that cheque would be the basis of enforcing a beneficial interest in the company. Obviously handing over a wad of cash would not meet that criterion. Essence of what Reg 1.11A requires is something in writing from which a person could enforce his or her ownership interest.

The abolition of stamp duty on the transfer of shares has reduced the restriction contained in Reg 1.11A(3).

Eligible Investment

188.112

In this Part, each of the following is an eligible investment if a person owns it for the purpose of producing a return in the form of income or capital gain, and not for personal use:

(a) an ownership interest in a business;

(b) cash on deposit;

(c) stocks or bonds;

(d) real estate;

(e) gold or silver bullion.

188.113

In this Part, a loan to a business is an eligible investment if a person makes it for the purpose of producing a return in the form of income or capital gain.

Note 1: For AUD, business innovation and investment points test, fiscal year, ownership interest and qualifying business: see regulation 1.03.

Note 2: Regulation 1.03 also provides that member of the family unit has the meaning set out in regulation 1.12.

Note 3: main business is defined in regulation 1.11.

Note 4: For the beneficial ownership of an asset, eligible investment or ownership interest: see regulation 1.11A.

Note 5: Complying investment is defined in regulation 5.19B.

Note 6: Complying significant investment is defined in regulation 5.19C.

Note 7: Complying premium investment is defined in regulation 5.19D.

Designated Investment

5.19A Designated investment

(1) Subject to subregulation (2), the Minister may, by legislative instrument, specify a security issued by an Australian State or Territory government authority as a security in which an investment is a designated investment for the purposes of a Part of Schedule 2.

(2) The Minister may so specify a security if and only if:

(a) an investment in the security matures in not less than 4 years from its date of issue; and

(b) repayment of principal is guaranteed by the issuing authority; and

(c) an investment in the security cannot be transferred or redeemed before maturity except by operation of law or under other conditions acceptable to the Minister; and

(d) investment in the security is open to the general public at commercially competitive rates of return; and

(e) the Minister is satisfied that the Commonwealth will not be exposed to any liability as a result of an investment in the security by a person.

SCHEDULE

SECURITYISSUING AUTHORITY

Government Bonds of VictoriaTreasury Corporation of Victoria

NSW Treasury Bonds, Waratah BondsNew South Wales Treasury Corporation

Queensland BondsQueensland Treasury Corporation

Queensland Industry BondsQueensland Industry Development Corporation before 1 December 1996

TASCORP Inscribed StockTasmanian Public Finance Corporation

Territory BondsNorthern Territory Treasury Corporation

Western Australian State BondsWestern Australian Treasury Corporation

South Australian Government Financing Authority BondsSouth Australian Government Financing Authority

Have one’s regulatory house in order

A company which is the vehicle for a business visa must have its regulatory house in order and migration advisers must do a painstaking test in this regard and should not rely solely on what the applicant says. In particular all peace must be made with the tax office including having one’s BAS and tax well in order. Check that the appropriate people are directors of the nominating company. Accountants operate under the misguided view that everything can be backdated. By law this is not correct although both the ATO and ASIC sometimes permit documents to be lodged late or amended.

There must be no ‘under the table cash payments’ and all proper wages must have been paid.

Accountants

Tax accountants can get in the way of successful business migration. Particularly in business visa cases one considers that a ‘successful business career’ would be evidenced by making profits. Accountants in privately owned companies seek to present accounts which minimize profits so as to reduce tax. The two objectives are incompatible. Accountants therefore have to be carefully scrutinized to ensure that the objectives of minimizing tax do not get in the way of proving the criteria for a business visa.

Note the requirements of ‘beneficial ownership’ above which require that trusts be formalized and any necessary stamp duty be paid. Accountants often setup trusts without quite knowing exactly what they are doing. These trust documents need to be carefully examined in order to ensure they have not diluted the ownership rights of the visa applicants. This issue will be discussed in more detail later.

The Significant Investor & PI visa – General

All the state and territory guidelines about this visa will have to be revisited after 1 July 2015 when the new regulations become law.

The writer has some concerns about this visa being the subclass 188 of the subclass 188 Business Innovation and Investment (Provisional) visa in the Significant Investor Visa stream.

Whilst there is a no requirement that the $5 million be kept in Australia once the subclass 888 is granted, there is this criteria in the ‘common criteria’ :

888.213

The applicant genuinely has a realistic commitment to maintain business or investment activities in Australia.

Some investment therefore must be maintained in Australia. If all the funds are removed from Australia on grant of the subclass 888 or shortly therefore then the visa could be cancelled on the basis of that the circumstances which permitted the grant of the visa did not exist.

Note also the potential problem in this other ‘common criteria’:

888.211

The applicant, and the applicant’s spouse or de facto partner, do not have a history of involvement in business or investment activities that are of a nature that is not generally acceptable in Australia.

The other issue which has to be flagged is that the subclass 888 visa is one of the visas that can be cancelled under s 134 of the Migration Act which states:

Section 134. Cancellation of business visas

(1) Subject to subsection (2) and to section 135, the Minister may cancel a business visa (other than an established business in Australia visa, an investment-linked visa or a family member’s visa), by written notice given to its holder, if the Minister is satisfied that its holder:

(a) has not obtained a substantial ownership interest in an eligible business in Australia; or

(b) is not utilising his or her skills in actively participating at a senior level in the day-to-day management of that business; or

(c) does not intend to continue to:

(i) hold a substantial ownership interest in; and

(ii) utilise his or her skills in actively participating at a senior level in the day-to-day management of;

an eligible business in Australia.

(2) The Minister must not cancel a business visa under subsection (1) if the Minister is satisfied that its holder:

(a) has made a genuine effort to obtain a substantial ownership interest in an eligible business in Australia; and

(b) has made a genuine effort to utilise his or her skills in actively participating at a senior level in the day-to-day management of that business; and

(c) intends to continue to make such genuine efforts.

A ‘business visa’ is defined in s 134(10) as follows:

business visa means:

(a) a visa included in a class of visas, being a class that:

(i) has the words ‘Business Skills’ in its title; and

(ii) is prescribed for the purposes of this paragraph

Reg 2.50 then states:

(2) For paragraph (a) of the definition of business visa in subsection 134(10) of the Act, the following classes of visas are prescribed:

(f) Business Skills (Permanent) (Class EC).

There is only one visa in the Class EC and it is the Subclass 888 (Business Innovation and Investment (Permanent)) and this is the visa that leads to permanent residence from the Significant Investor Visa stream of the subclass 188 Business Innovation and Investment (Provisional)

It is difficult to see how this business visa cancellation regime dovetails in with the Subclass 888 visa given that visa holders coming to permanent residence from the Significant Investor Visa stream as these subclass 188 visa holders do not have to set up a business.

But the history of the permanent business visas in Australia has been that once a business visa sector is considered by the government of the day as not performing the chop comes in in some form or other.

Thus in five years’ time if the government finds that most of the subclass 888 visa holders coming from the

the Significant Investor Visa stream have taken all their money back home, expect retaliation.

Here is the basic schedule 2 criteria:

188.25—Criteria for Significant Investor stream

Note: These criteria are only for applicants seeking to satisfy the primary criteria for a Subclass 188 visa in the Significant Investor stream.

188.251

The applicant was invited, in writing, by the Minister to apply for the visa.

188.252

(1) The applicant has made, on or after the time of application, a complying significant investment (within the meaning of regulation 5.19C as in force at the time of application) of at least AUD 5 000 000.

(2) The applicant has a genuine intention to hold the complying significant investment for at least 4 years.

Note: A complying significant investment may be based on one or more investments.

188.253

(1) The applicant has given the Minister evidence that the investment complies with the requirements set out in regulation 5.19C as in force at the time of application.

(2) The applicant has given the Minister a completed copy of approved form 1412, signed by the applicant and each other applicant aged at least 18.

Note: Approved form 1412 is a deed of acknowledgment, undertaking and release, signed by each person mentioned in subclause (2), under which they:

(a) acknowledge that they are responsible for their financial and legal affairs; and

(b) undertake not to bring an action against the Commonwealth in relation to any loss relating to the complying significant investment; and

(c) release the Commonwealth from any liabilities in relation to any loss relating to the complying significant investment.

188.254

If the applicant was nominated by a State or Territory government agency, one or more of the following have a genuine intention to reside in the State or Territory whose government agency nominated the applicant:

(a) the applicant;

(b) the applicant’s spouse or de facto partner.

188.255

(1) The applicant satisfies public interest criterion 4005.

(2) Each member of the family unit of the applicant who is an applicant for a Subclass 188 visa satisfies public interest criterion 4005.

(3) Each member of the family unit of the applicant who is not an applicant for a Subclass 188 visa satisfies public interest criterion 4005 unless it would be unreasonable to require the member to undergo assessment in relation to the criterion.

The Guangzhou branch of the Bank of China (and the writer is told, only that branch) will allow the export of $5 million for the purpose of investing funds for the SIV.

Note the accompanying material contains the guidelines for the PRC as applied by the HK consulate.

PIV Schedule 2 :

888.25—Criteria for Premium Investor stream

Note: These criteria are only for applicants seeking to satisfy the primary criteria for a Subclass 888 visa in the Premium Investor stream.

888.251

(1) At the time of application the applicant has held a Subclass 188 (Business Innovation and Investment (Provisional)) visa in the Premium Investor stream for a continuous period of at least 12 months.

(2) For the whole of the period during which the applicant has held the visa mentioned in subclause (1), the applicant has held a complying premium investment (within the meaning of regulation 5.19D as in force at the time the application for that visa was made) except any part of the investment that is a philanthropic contribution.

(3) For any part of the complying premium investment (except any part of the investment that is a philanthropic contribution) that is, or was, a direct investment in an Australian proprietary company:

(a) the company was a qualifying business for the whole period; or

(b) if the company has been unable to operate as a qualifying business, the Minister is satisfied that the applicant made a genuine attempt to operate the business as a qualifying business.

(4) The applicant has given the Minister evidence that the investment complies with the requirements set out in regulation 5.19D as in force at the time of application.

Barbara DavidsonSeptember 16, 2017Some Pathway Planning

Some Pathway Planning

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