Australian Immigration Daily News

What is the correct interpretation of the term “main business” in Regulation 1.11? 

This is not merely an academic question, of interest only to those who wish to delve into the arcane and Byzantine intricacies of migration law. 

No, the question has genuine, real world, practical importance for people who have held Provisional Business Skills visas (subclass 163) and who, after several years of conducting their businesses in Australia, are seeking Residence Business Skills visas (subclass 892). 

Why is the question of what a main business important for applicants seeking subclass 892 visas? 

Because the criteria of such visas, specifically subclause 892.212(c)(ii) requires that the applicant demonstrate that the assets owned by the applicant and/or the applicant's spouse or de factor partner in the “main business” must have a net value of at least $75,000 AUD throughout the 12 month period ending immediately before the application is made. 

So, suppose you have a complex situation where several very diverse business activities are all owned by a single legal entity and the businesses all share the same Australian Business Number.

Also suppose that the reporting for the several businesses is all done on a consolidated Business Activity Statement for the legal entity that owns the businesses, and likewise that the profit and loss statements and the assets and liabilities for the separate businesses are all reported on a consolidated basis for the umbrella legal entity that owns them. 

In that circumstance, can the umbrella legal entity that owns the separate businesses be relied on as the “main business” for the purpose of satisfying the “asset test” of subclause 892.212(c)(ii)? 

Or must the visa applicant “nominate” one or more of the businesses that are operating under the umbrella of the legal entity, and rely on the assets of those businesses in order to meet the asset test? 

Ain't migration law grand? Does it not seem at times like the issues raised are so difficult that they amount to trying to calculate how many pieces of fruit can grow on a tree? Or how many angels can dance on the head of a pin? Or how many American lawyers (I am one!) are required to “install” a light bulb? (Note: the Migration Alliance blog remains a “family publication” so the last example has been phrased politely!!”) 

Well, it turns out that the question of how the term “main business” should be interpreted has recently been decided by Judge Barker of the Federal Court, in the case of Minister for Immigration and Border Protection v Snyman (2016) FCA 242 (11 March 2016). 

The factual scenario in the case was as suggested above: The applicant, Mr Snyman, is a South African national. He was granted a Provisional Business Skills visa in February 2009, and came to Australia in October of that year. He is a 50 % shareholder of an Australian company known as “Cutman Pty Ltd”. Since the time of its incorporation, Cutman owned 5 different businesses that operated in Australia: “Styleworx Hair Design & Beauty”, “Fitzsimmons Meats”, “Vortik Fusion”, “Status Engineering Monitoring Systems” and the “La Rotunda Cafe”. 

Although the precise nature of the business activities that these businesses owned by the umbrella legal entity “Cutman” operated was not discussed in detail in the Federal Court's judgement, it seems apparent from the names of these companies that they were each engaged in very different, unrelated types of business activities. 

The issue in the case was whether Mr Snyman could rely on the assets of the larger umbrella entity, Cutman, to meet the asset test, or whether he would have to rely on the assets of the businesses that were owned by Cutman to satisfy the test. 

(There was one further difficulty: under Regulation 1.11(2), if an applicant has an ownership interest in more than 1 qualifying business (a business that is operated for the purpose of making profit through the provision of goods or services to the public and that is not operated primarily for the purpose of speculative or passive investment) then the applicant may nominate only 2 of those qualifying businesses as a main business for the purpose of attempting to satisfy the asset test.

Therefore the practical effect of the limitation of Regulation 1.11(2) is that Mr Snyman could only nominate 2 of the businesses that were owned and operated by Cutman, assuming that Cutman could not itself be considered to be the “main business”). 

Confused yet? Well to make matters all the more confusing, it appears from the Federal Court's judgement that Departmental policy at the time that the application was lodged stated that a “main business” would be determined by the activities conducted under the umbrella of a single Australian Business Number.

Therefore, it would appear that the Department's own policy suggested that the assets of a business structure constituted in the manner that Cutman was (an umbrella legal entity owning several diverse, unrelated business operations all using the same ABN) could qualify as a “main business”. 

Would you like to be confused even further?

Well it appears that Mr Snyman's son was granted a Residence Business Skills visa, and that he had relied on the umbrella legal entity, Cutman, as his main business.

However, the Tribunal held that, in its view, the evidence that had been before the Department indicated that the visa had been granted to the son “on the basis of Cutman having two main businesses”, the cafe and the hair salon. 

Making matters all the more complicated was the fact that the Federal Circuit Court concluded that the Tribunal had misinterpreted the term “main business” and had committed jurisdictional error by concluding that the umbrella legal entity which owned and operated the various businesses could not be considered to be a “main business”.

In other words, in the view of the Federal Circuit Court, the umbrella legal entity did qualify as a “main business” and the assets of the entire business enterprise (all businesses owned and operated by Cutman) could be “counted” toward the asset test. 

So, how did Judge Barker sort this all out? (Not an enviable task right?) 

In the end, Judge Barker held that the Tribunal had decided, as a matter of fact, that the various business activities that had been conducted under the umbrella of the legal entity (Cutman) were actually “very different, very individual businesses”. 

Therefore, it was Judge Barker's view that the Tribunal had been correct to conclude that the umbrella legal entity Cutman could not be relied on as the main business, and that it would thus fall to the applicant to nominate a maximum of 2 of the businesses that were operating under the umbrella of the legal entity to satisfy the asset test. 

It thus appears that what was ultimately determinative of the outcome of this case was that the discrete businesses that were operating under the umbrella of the larger legal entity (Cutman) were very different in nature from each other (engaged in highly unrelated business activities). 

So the Court's conclusion was that even if several unrelated businesses are owned by a single legal entity, use the same ABN, and prepare consolidated Business Activity Statements, profit and loss and assets and liability statements, that does not make them a single “main business”.

Where the businesses owned by the umbrella legal entity are engaged in very different spheres of business activity, then the larger umbrella entity will not be able to be relied upon to meet the asset test. And the applicant may be required to “nominate” no more than 2 of the unrelated businesses that operate under the common umbrella of the legal entity that owns them all. 

There was some suggestion in the Snyman decision, however, that if the businesses are “closely related” (for example,if the umbrella legal entity owns a chain of hair dressing shops) then it that circumstance the umbrella entity may be able to be considered as a “main business” for the purposes of the “asset test”. Although that issue was not directly decided by Judge Barker, that certainly appears to be a likely implication of the decision. 

So, it really does appear that the outcome in this case was driven by the particular facts. It seems that the real problem here was that the various businesses operated by Cutman were completely unrelated to each other. In a different case, where the businesses owned by a common umbrella legal entity are engaged in related or the same types of activities, it is very possible under the Snyman decision that an applicant may be able to rely on the larger umbrella entity as the “man business”. 

Clear, right?

Concordia Pacific, Email: This email address is being protected from spambots. You need JavaScript enabled to view it.