Winnie ZHANG

Current application requirements for the Australian Subclass 188A visa

Is the Subclass 188A success rate high?

Australia has long sought Subclass 188A applicants with the aim of attracting investment to drive economic growth. Whether it is the Department of Home Affairs or the state governments, the core assessment focus when reviewing a Subclass 188A applicant’s business is:Does this business contribute to local economic development? If your chosen business can align as closely as possible with the following official requirements,then it is the kind of business Australia welcomes — and therefore more likely to be approved for permanent residency.

In your business, you must do at least one of the following:

· Increase the level of business activity and competition in the Australian economy;

· Develop business links with international markets;

· Employ Australian residents or citizens;

· Export Australian goods;

· Introduce or develop new technologies;

· Produce goods or services that Australia would otherwise import;

The Department of Home Affairs has mandatory requirements regarding your equity stake in the business, the company’s annual turnover, the number of employees, and your family’s asset position. In addition to these quantifiable requirements, the Department and state governments place very significant weight on the following two key assessment criteria:Does the applicant have full management authority over the company? Are they directly involved in day-to-day management and operations?When holding the Subclass 188A visa, you must adhere to three principles:

Principle One: Hold a substantial ownership interest in an Australian business

Owning 100% of a business is ideal. However, if you are acquiring a stake in another company, it is recommended that you hold at least 51%, which helps demonstrate your full management authority over the business.It is not advisable for two applicants to co-own shares and use the same business to apply for the Subclass 888A — the applicant with the smaller shareholding is at significant risk of refusal. Even where each holds 50%, the party with weaker decision-making authority is likely to be refused.

Principle Two: Be involved in the business’s day-to-day management at a senior level

The purpose of the Subclass 188A visa is to attract skilled business operators — not merely to bring in capital. Subclass 188A holders are required to demonstrate their business acumen by showing that they have successfully operated one or more businesses in Australia.Accordingly, whether the applicant is personally involved in running and managing the business is a primary area of scrutiny for the Department of Home Affairs.Migration legislation is clear on this point: applicants must be directly and continuously involved in the day-to-day management of the business, and must be the key decision-maker who sets the overall strategic direction and influences business performance.

To successfully obtain the Subclass 888 permanent visa, Subclass 188A holders must start keeping evidence of their personal involvement in business management right from the outset.Supporting evidence typically includes signed documents, supporting letters, meeting minutes, and similar materials.Of particular importance,evidence of at least two years of involvement in business management is required — not just the final 12 months.

Principle Three: Maintain a reasonable period of residence in the state where the business is located

Given that applicants are required to be deeply involved in the day-to-day management of the company,you are also expected, as a general principle, to be residing in the location of your business for the majority of the time.This is one of the key assessment criteria,and you will need to provide relevant travel records and evidence of your daily life in that location when lodging your application.It is also important to note that the question of management involvement is linked to the residence requirement. As is widely known, when applying for the Subclass 888A permanent visa, applicants must have resided in Australia for at least 12 months in the three years prior to lodging the application.However, even if an applicant meets this minimum residence requirement, if they have spent extended periods outside Australia, the case officer may question whether they have been genuinely involved in the day-to-day management of the business.Applicants in this situation should pay particular attention to preparing evidence showing how the business was managed during their periods away from Australia.

 In addition to keeping the above principles in mind, applicants must also avoid certain pitfalls to ensure the best possible chance of obtaining the Subclass 888 permanent visa grant.

• Business ‘active operation’ for less than two years

When applying for the Subclass 888A permanent visa, many requirements apply only to the most recent year. For example, requirements relating to personal assets in Australia, the business’s annual turnover, the business’s net assets, and the number of local employees all refer only to the 12 months prior to lodging the application. Some Subclass 188A holders mistakenly assume that other requirements also only apply to the final 12 months, which leads to refusals of their permanent residency application. In fact, the following three requirements must be satisfied for at least two years:

1. Maintaining a shareholding of 30% or more in the business (10% for publicly listed companies);

2. Being involved in the day-to-day management of the business;

3. Maintaining ‘active operation’ (Actively operating) — and this is the point most easily overlooked. ‘Active operation’ requires that the business has already been providing products or services to the public. Many applicants who have newly established their business are unclear on this point: they do not operate seriously in the first year, and some do not operate at all or have no evidence of market development — ultimately resulting in a refusal.

• Unclear source of funds

This is another issue that Subclass 188A holders frequently overlook. Some applicants assume that because they fully explained their source of funds when applying for the Subclass 188A, this issue will not arise at the second stage. This is not the case. Migration legislation clearly stipulates that when assessing the following two types of assets, the case officer must verify that the assets were lawfully obtained:

1. The applicant’s and spouse’s personal assets in Australia;

2. The applicant’s and spouse’s net assets in the business;

For Subclass 188A holders, assets held in China will have been explained and accepted at the Subclass 188A application stage. The focus at the second stage is therefore on demonstrating that the above-mentioned assets were lawfully transferred from China to Australia. Some applicants invest in the business using funds in Australia that were not disclosed in the Subclass 188A application and cannot demonstrate a lawful transfer pathway; others use funds transferred from accounts held by other individuals, or from Chinese company accounts. Any of these scenarios may lead to the serious consequence of being unable to prove the lawful origin of funds.

• Choosing the right business

The types of business our applicants typically pursue in Australia include: purchasing an existing established business, setting up a new company (such as an import/export trading business), entering a joint venture, or acquiring a stake in an existing company. Purchasing an existing established business is the option chosen by the largest number of applicants.We recommend seeking assistance from a migration agent or solicitor before purchasing a business to help assess whether it meets the Subclass 888A requirements, and to carry out thorough due diligence before signing any contract.It is advisable to purchase a business in the mid-price range rather than one that is very cheap. If you are in trading, we recommend focusing on exports — specifically exporting products from your nominating state (not other states) to China. You may also import products from your home industry in China into Australia, combining both import and export activities. However, do not engage solely in importing. It is also worth noting that a franchise business does not necessarily demonstrate management involvement, and this is another pitfall that can lead to refusal.

• Start your business early

Starting your business as early as possible is advisable, so that if you encounter a refusal or other unexpected issues when applying for the Subclass 888A, you still have time and room to manoeuvre. While it is possible to apply for a Subclass 188A extension, certain conditions must be met.

• Aim to remain profitable

Although the Department of Home Affairs has no mandatory requirement regarding the profitability of the business,it is nonetheless advisable to keep the business as profitable as possible — at the very least, the business should be profitable at the time of lodging the application,as this demonstrates the sustainability of the business, which is what the Department of Home Affairs hopes to see.