How to Deal with Sponsors with a Significant Net Loss
Analysis Summary
It’s a scenario that many of our business clients face – a business with significant net loss but requires sponsoring a foreign worker to ensure that their business continues to operate and increase their business profitability.
This is very common with a ‘start-up’ or newly established businesses as they are expected to have initial expenses higher than their income generated in the first few years. However, in this case study, we have a business that has been operating for over 10 years with consecutive net losses for a few financial years, which accumulated into a total of almost $400,000 in retained loss.
Yet, within the last two years, we have secured not just one but four (4) nomination approvals for the Temporary Skilled Shortage 482 and Employer Nominated Scheme 186 applications.
Kris, the founder and principal lawyer at Kris Ahn Lawyers and an Accredited Specialist Immigration Lawyer, concludes this case study with key takeaways for future reference.
Background information
The client is a restaurant that has been in business for over 10 years and has an average revenue between $1-2 million annually.
However, due to the impact of COVID-19, their income and net profits have started to decrease.
Since FY2022, the business has incurred significant net losses in consecutive years, which resulted in them recording about $400,000 in retained loss.
Despite the reduced income generated, the business continued to maintain its sponsorship of employees and hire and sponsor new workers on the TSS 482, and the ENS 186 visas.
Concerns
Both the TSS 482 and ENS 186 nomination applications share the “Genuine Position”, and the ENS 186 nomination has additional requirements for the “financial capacity” of the business to maintain the employment of the workers for at least 2 years.
Whilst the TSS 482 nomination does not specifically require the ‘financial capacity,’ the Department of Home Affairs does assess the business’s financials as part of the ‘genuine position’ requirement. They assess the cases with an approach that if a business cannot afford to employ a worker, it cannot be a genuine position.
Therefore, with the recorded ongoing losses, the main concern for the business is satisfying the above-identified legal criterion for each of the matters.
Then, as expected, the clients received the Department’s dreadful “Request for More Information” which contained about two pages worth of their adverse findings on the clients’ financials – inviting us to provide more information to demonstrate how the business can satisfy the requirements.
Decision & Lessons
Our approach to this challenge was carefully and meticulously prepared, and progressed.
We had to look beyond the numbers on their financial statements and analyse the fundamental reasons for their need for each employee.
We communicated and coordinated with the directors and stakeholders of the business, as well as their accountants and have helped them write structured statutory declarations and letters of support & opinion.
We assigned two lawyers with the appropriate experience to tackle this case.
This allowed us to convince the decision makers that despite the significant retained net loss, it is only temporary – but more importantly emphasised that it was a managed loss, foreseen by the business. We have also emphasised the role of each of the nominees for the applications, and that the business can only benefit from the sponsorship, and does not incur additional expenses from their ongoing employment.
In the last two years, during which the business recorded annual net losses averaging about $200,000, we have helped the client successfully nominate four (4) of their chefs, including their head chef, with a base annual salary of $100,000PA + Super.
Employer Sponsored Visa Subclass 186 (ENS Visa)
To find out more, please visit our Employer Sponsored Work Visas Page. Additional articles and information can be found on our website:
- 186 TRT Visa Successfully Granted: General Manager
- General Update on Employer Sponsored (186 ENS) Visa Applications
- Difference between Employer Sponsored Work Visas?
- Understanding the Training Visa Subclass 407
- Navigating Age Limitations & English Requirements: Alternatives to the 485 Visa
- TSS Visa Nomination Approval：Contract Administrator
- TSMIT Updated: Increase in the Temporary Skilled Migration Income Threshold to $73,150
Disclaimer: Not Legal Advice
The information provided in this blog post/article is for general informational purposes only. It does not constitute legal advice or create a representative-client relationship. While we strive to provide accurate and up-to-date information, the content may not reflect the most current legal developments or specific circumstances.
Do not rely solely on the information presented here – but please book in a consultation with us to see how you this information applies to you and may benefit you. Any reliance on the material in this post is at your own risk.
Australian immigration law is arguably one of the most complex laws in Australia. Seek professional legal advice tailored to your individual needs before making any decisions based on the content of this post.
