Michael Cradock is a chartered accountant and migration agent, and owner of JADE VIP. You can contact him at michael.cradock@jadevisa.com.au or by calling (0)287 300 9188.


 

Australia – The Lucky Country

Everywhere we turn, we are reminded of what a great country we live in. During March 2020, Australia’s leaders have made incredibly tough and forward-thinking decisions to protect our lives and livelihoods.
Our Prime Minister, Ministers, State & Territory Premiers have worked together, democratically, making critical health and economic decisions on our Great Nation’s behalf.

Our border, police and defence forces have shown us that their organisational and people management skills are top-notch and they are ready to handle all of the humanitarian challenges ahead. And our health workers need to be applauded for their tireless and selfless acts to help patients of COVID-19.

Importantly, communications from our leaders to the public have been transparent and frequent. Most of us feel reassured and informed by these regular communications.

Sadly, businesses both large and small are facing closure. Many will not re-open without significant capital injections to get them started again.

Unemployment rates will rise faster and faster. Finding new jobs is difficult – more so because of restrictions on travel movements. Once again, our leaders have shown great leadership and foreseen a rise in the need for people to access mental health advice. Our Government has allocated specific financial support to organisations who provide vital mental health advice.

Australians can access two financial support packages:

• Job-seekers allowance (for unemployed); or
• Job-keeper payments (for employed).

The Prime Minister and Treasurer have notified us that more fiscal support will be necessary and provided.

In contrast to the coordinated financial and health support Australians can access, let us consider for a moment a situation in another part of the world. Only then may we realise just how lucky we are to be in Australia.

Please consider this for a moment.

Venezuela had 10,000% hyperinflation last year. It was a country already suffering from shortages in basic foodstuff and medical supplies long before COVID-19 hit. As of mid-March, 40,000 Venezuelans are reported to be migrating daily from Venezuela into Columbia to find food and health services. Many work by day to pay for their accommodation and food by night.

Venezuela’s current leader is not recognised as the legitimate leader by over 40 countries. There is no control. There is chaos and panic and a tsunami of disease predicted to cause devastation.

 

Business Impact

Back in Australia, the Government needs businesses to survive and thrive again. The biggest companies have already closed, e.g. Qantas (airline) and Myer (retail) and more will follow. A permanent shift in retail buying patterns to online will massively reduce the number of retailers who choose to have a physical presence. Amazon will finally become a viable platform in Australia after years of struggling to make the numbers work.

Like many developed economies, Australia is a nation of small business owners. These small- and medium-sized enterprises are often called the “back-bone” of the Australian economy. Small businesses will continue to be the “back-bone”, but Small Business 2021 is going to be completely different to Small Business 2019.

 

Migration to the Rescue

What the Treasury gives out with one hand, they will already be planning to recoup with the other. And here is where migration has an important role to play in the economic re-build.

Per the ABS 2016 census results, nearly half (49%) of all Australians were either born overseas (first generation) or have at least one parent born overseas (second generation). Only 51% were born in Australia to Australian-born parents (third generation).

In other words, when you take your walks in the morning, or look around your workplace (offline or online Zoom meetings) half the people you see and interact with are from migrant families.

Every government around the world is facing a crisis in its own country. Therefore, inter-government lending will slow down and countries will need to look inward to how they rebuild their reserves. Australia is no different.

After handing over all the money to the public, and with a lack of available debt options, the Government and Treasury may only have a few “internal” levers to build up their reserves. They can:

1. Focus their remaining scarce capital on funding new industries (high risk given the high cost of labour in Australia);

2. Increase the levels of tax rates (very unpopular politically and possibly not viable, given increase in household debt following the 2020 recession/depression);

3. Introduce a broader set of taxable events, including inheritance taxes like the UK already has (again, very unpopular, but a viable strategy to effectively re-distribute wealth); and/or

4. Increase the number of younger people (20s – 40s) who enter Australia and pay taxes over the next 20 – 40 years.

Treasury figures show a 1% increase in population correlates to a 1% increase in GDP. Given that many families will prefer to have less children because of high costs, Net Overseas Migration will need to increase.

It seems that however you look at the problem, whilst travellers brought COVID-19 into Australia, it is Migrants who add to the tax base, Migrants who fill the employment gaps and, importantly, Migrants who bring down the median working age to allow for sustainable collection of taxes over a long period of time. Put simply, Migration of 20 – 40 year olds increases tax revenue collection and increases GDP.

The number of Permanent Residence places is currently set at only 160,000. Given recent decisions, it is conceivable that this number could double or triple to rebuild Australia’s treasury reserves.

Certainly, Australia has the available space. It is a huge country and not at all heavily populated.

The decision to increase the number of Permanent Residence places would not be a popular political announcement at this current time. So, we could expect the timing of any such decision to be in 2022.

 

Wealthy Migrants and Regional Migration

Business and investments visas (188-888 & 132) attract wealthy people who provide economic benefit to the areas of settlement.

Previously, the Migrants on 188 or 132 visas settled in the capital cities of Sydney and Melbourne. Their investments benefited those cities.

From 2018, there has been a consistent effort from Federal and State Governments to set business and investment policies to encourage business and investor Migrants to designated regional areas.

Interestingly, the whole of South Australia is “regional” for these purposes. With South Australia’s favourable policies allowing investment into a small property development business, naturally substantial capital has flowed into Adelaide’s construction and residential property markets. Other states actively discourage property development as a business in an almost synchronised approach by the States.

It will be interesting to see which State responds fastest to relax their policies and encourage business migration back to their State.

Australia’s most attractive investment/business migration policies fall into two categories:

1. Investment into Government Bonds in return for 2-step process to permanent residence (188B-888B); and

2. Investment into Private Business in return for either Immediate Permanent Residence (132A) or 2-steps to permanent residence (188A-888A).

Another investment visa exists, but in its 2.0 version is no longer widely adopted, i.e. 188C-888C v2.0 which requires $5m to be invested with a fund manager. Whilst the 188C-888C v2.0 allows people to not need to stay in Australia for very long, the $5.0m investment is seen as unnecessarily risky.
Wealthy migrants have preferred the 188B-888B or 132A. Those who do not qualify for the 188B-888B or 132A opt for the 188A-888A.

 

Citizenship-by-Investment to Australia?

Currently, Australia does not have a Citizenship-by-Investment (CBI) program. The world took notice of how well Australia weathered the Global Financial Crisis. And the world’s wealthiest are once again watching how Australia will weather this COVID-19 Health & Economic Crisis.

Citizenship-by-Investment to Australia may now be something the Australian Government seriously considers. The demand will likely be very substantial.

CBI programs tend to either require a one-off contribution to the country’s Government funds which is not returned or requires a substantial investment into residential property development. The applicant is given a choice. Cyprus’s existing CBI program has risen in popularity, unsurprisingly.

Given that Australia’s construction industry employs so many workers, it is possible that a CBI program will be given serious consideration.

 

Attracting Investment to the Regions

Prior to the COVID-19 health and economic crisis, the Department of Home Affairs had already implemented new legislation and policies to drive migration to regional areas of Australia.

By way of personal background, I live in Newcastle, NSW – a beautiful beachside city, with its own international airport and RAAF Defence base. Sydney is a short 2-hour drive south of Newcastle.

Just like 1 in 4 of us, I am a Migrant. I arrived from the UK and came straight to Newcastle, Australia in 2008. I am now an Australian Citizen and hold dual passports for United Kingdom and Australia. Another great thing about Australia is they allow you to hold dual passports.

Between 2008 and 2019, Newcastle had been progressively changing into a city that was being designed for more inner-city living for young professionals and down-sizing retirees.

Newcastle now has a light-rail system, whose network can be expanded with more infrastructure investment.

Newcastle has several apartments blocks built and several under construction. Certainly, developers have been ploughing capital into the regeneration and gentrification of semi-industrial areas like Wickham.

The University of Newcastle invested in a new inner-city campus. That has seen an increase in demand for student accommodation and yet further construction.

Prior to COVID-19 restrictions, Newcastle had a booming new boutique bar and multi-cultural restaurant scene. That will come back again.

International investment has driven other important changes, including to Newcastle’s education landscape. In December 2016, Japanese privately-owned Nihon University purchased the Newcastle Courthouse for $6.6m. After the development approvals process, in 2020 Nihon started construction of its language and student accommodation facilities.

Importantly, Nihon University could have chosen Sydney to locate its first overseas international education site, but they didn’t. They chose Newcastle and this speaks volumes to the potential of Newcastle to attract further international investment. Nihon University will not be the last overseas organisation who see great value for their international business model.

Fortunately, given the travel restrictions in place preventing trade and investment delegations overseas, Newcastle and other regional areas of Australia don’t have to look too far to attract further international investment. If you have a University and TAFE in your region, then you have international investors on your doorstep.

Australia’s international students pay a fortune in school fees to attend our tertiary education institutions. Many of these students will return to their home country and be the catalysts for future international trade. A smaller number will choose to stay in Australia and apply for one of the few visas that allow them to remain lawfully in Australia.

In brief, international students who want to become a Permanent Resident and then Citizen of Australia will apply in one of three (3) categories of visas: Partner Visas, Employer-Sponsored visa and Skilled Regional Visas.

And it is the Skilled Regional Visa that is most relevant to the potential partnership between existing small businesses and existing international students in our regional areas, including Newcastle, NSW.

 

Restricted Pathways to PR for International Students

To understand the importance of the 491 Regional Skilled Visa, we need to make some assumptions about what might happen to an International Student’s other viable visa options given the rising un-employment rates expected in Australia as a direct impact of stopping the spread of COVID-19.

• Partner Visas require a genuine and ongoing relationship and an Australian Citizen or Permanent Resident to be the ‘partner-sponsor’. Visa expiries of existing visas or risk of breach of visa conditions (NOTE: 485 Graduate visa and 482 condition 8607), will place pressure on applicants to make faster ‘marriage’ decisions. Due to the reduction of options of other visas (see below), we can assume Partner Visa applications will increase substantially in 2020 and 2021. In response, rightly so, Partner Visa applications will be assessed with greater scrutiny by the Department of Home Affairs.

• Employer-Sponsored Visas require an employer to prove they cannot find alternative local Australian labour before they can be approved to hire a non-permanent resident. That evidence will become increasingly difficult in non-health/non-medical related industries. In addition, business closures and forced redundancies impact on visa conditions (e.g. 8607 60-day new employer rule on 482 visas). There will be added pressure and public sentiment to favour Australian workers for any existing or new non-specialised jobs. This will lead to an increase in the number of people competing for new Employer-Sponsored jobs.

• Skilled Visas require applicants to compete to have the most “points” for job occupations with labour shortages. We can expect Australian Citizens on the Job-seeker allowance to be retrained and given priority access to soft- and hard-skills jobs. However, many “soft-skills” jobs will be completely online and employers will shift more of these jobs offshore to cheaper labour countries, which might include USA, as well as SE Asia. We can expect health workers and management jobs in health services to remain on the occupation lists and for global competition to increase for these positions.

 

Special Treatment for 491 Visa

In November 2019, an important new temporary-resident visa was introduced to Australia. The 491 visa Skilled Work Regional visa.

After holding the 491 visa for 3 years, living and working in regional Australia, applicants are guaranteed Permanent Residence via the 191 visa.

The importance that this Government places on the 491 visa is evidenced by Services Australia changing the definition of “Australian resident” for social security purposes to include 491 (and 494 visa holders). Previously, only Australian Citizens and Permanent Residents were included in the Australian resident definition.

 

Favourable State 491 Policies

The 491 visa Department of Home Affairs requirements include:

• Be nominated by a State or Territory
• Less than 45 years old
• Have a positive skills assessment
• Score 65 points or more on the 491 points test
• Have competent English (IELTS 6.0 in each of the 4 components)
• Have an occupation on the combined list of occupations for 491 list(s)

Importantly, the 491 visa requires a State or Territory to nominate the applicant.

After holding the 491 visa for 3 years, living and working in regional Australia, applicants are guaranteed Permanent Residence via the 191 visa.

Each State determines its own policies on how it will decide which applicant to “nominate”.

Typically, the prioritisation will be to international students (in its own state), in-demand jobs and economic benefit (e.g. preservation or creation of jobs) that will be derived as a result of the nomination.

Each State can produce its own occupation lists, e.g. to target 491 to High Demand jobs, and require the occupation of the applicant to be on that list. Recently, for example, Tasmania Skilled Team designated all Health-related jobs as High Demand and as of 2 April 2020 is only accepting state nomination application for High Priority jobs.

Interestingly, the Queensland Government seems to be ahead of the pack with its 491 State Nomination Policies that target the preservation (and future recreation) of jobs, in the form of the Small Business Owner 491 policy.

Below is an extract from Queensland 491 Skilled Migration page:

“This [491] visa is a provisional visa that allows nominated skilled workers to work and live in REGIONAL Queensland for five years, and is a pathway to permanent residency. Employment can be undertaken in the following ways:
1. Work for one or more employers
2. Two part-time jobs
3. Work in own business as an owner/operator [i.e. Small Business Owner program]”

The third category – Queensland’s Small Business Owners (SBO) selection policy – is of most interest to international students with capital to invest in their own business.

Queensland does not require the SB0 491 applicant to have been at University in Queensland. So, many international students will move to Queensland (when permitted to do so) to buy a small business and apply for the 491 SBO visa.

Queensland’s criteria to provide SBO 491 State Nomination include:

• Meet the Department of Home Affairs 491 requirements
• Be on a visa that allows full-time work and operation of the business for a minimum of 35 hours per week (i.e. 485 visa)
• Have already purchased 100% of an existing business in regional Queensland for a minimum of $100,000
• Be trading in the business for 6 months prior to 491 State Nomination application
• Employ one (1) employee who is an Australian resident working a minimum of 20 hours per week (includes Temporary Residents and Students)

Other states have not yet followed Queensland’s lead with a specific and clearly laid out policy on buying a business and then applying for a 491 visa.

However, it makes sense – particularly in the current economic recession – that all States will be supportive of applications for 491 State Nominations.

 

International Postgraduate Students

There has never been a more important time in Australia for postgraduate students who are eligible to apply for the 491 visa, to look seriously at investing capital into a business and securing their state nomination.

Grant money and cheap bank debt will be available for existing businesses who are able to reinvent themselves. Private capital can stimulate those businesses further.

Masters and PhD postgraduates can collaborate and be creative about how they can work together to setup several businesses in a supply chain.

For example, a postgraduate doing a Masters in Business Administration can work with another international student who may have the required capital and identify businesses in regional areas that might be open to allowing a 50% buy-in (25% per postgraduate).

Whilst Queensland’s SBO requires a 100% ownership interest, that policy is driven by the desire to ensure that $100,000 is the minimum per person investment made.

Therefore, if there is a good business idea that requires $200,000 capital to buy a 50% stake in an existing business, which preserves jobs and creates the opportunity for jobs growth, then most states will be very willing to look at an application from two 491 applicants.

To sure up these strategies, local associations and councils can provide ‘Letters of Support’ to the applicant. Indeed, even local MPs and State Ministers will get involved to support initiatives such as these designed to help Australia on the road to recovery.

To be an Australian permanent resident is a privilege, and investing capital in small businesses at this time will be favourably looked upon.

 

Michael Cradock
JADE Visa MARN 1799333

Michael.Cradock@jade-vip.com

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