Visa 188 - What type of business is identified as "qualifying business" ?

You may already held Subclass 188 business innovation visa or your application is currently being processed. It is important to understand what type of business is identified as “qualifying business”. Here are some explanation from Regulation 1.03 and PAM 3 – GenGuide M.

"Qualifying business" means an enterprise that:

1. 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
2. is not operated primarily or substantially for the purpose of speculative or passive investment.

Operated for the purpose of a profit
It is not necessary for a business to have operated at a profit to be considered a qualifying business, only that it is being operated for the purpose of making a profit.

Officers should consider the whole circumstances when considering whether an applicant has operated a business for the purpose of making a profit. A non-profit or not-for-profit business would not generally be considered a qualifying business. If an entity or business is registered as non-profit or not-for-profit, officers should take this as a strong indicator that the entity or business has not been established for the purpose of making a profit.

If the turnover requirement has been waived by the sponsoring/nominating State/Territory government - for example, refer to 892.213 or 888.226 - to be considered a qualifying business the business must have commenced trading, unless there is a long lead time taken to develop the product and to realise profit (for example, in primary industry, where the products take time to grow) but this does not discount the purpose - the applicant must be actively working towards commencing trading.

Rental property / businesses
The provision of rental property and businesses that are primarily or substantially for the purpose of speculative or passive investment are specifically excluded from being qualifying businesses.

Interrelated companies
In the few instances where a main business is split into two companies - one operational and the other involving land and buildings used in the business (therefore only one of these two companies is satisfying the definition of a qualifying business) - these two interrelated companies may be regarded as one main business for the purposes of meeting the definition of qualifying business.

However, rent or lease fees charged from the holding company to the operating company should not be included in any calculations for the main businesses turnover as these are simply internal transactions of the main business.

For clarity, the ABN will identify the single business to be considered as a qualifying business.

Goods and services to the public
If goods and/or services are provided for profit to more than one person or entity (not otherwise related to the operator of the business), the business is considered to provide goods and/or services to the public. Applicants must demonstrate that the qualifying business is providing goods and/or services to the public.

A business would not be considered to be providing goods and/or services to the public if:

• the customer base of the business is limited to family members
• the goods and/or services have historically been provided to a single person or
• the goods and/or services are provided exclusively to a single entity, unless there is an arms-length commercial arrangement that does not restrict or limit the business operations. (“Arms-length” is where a seller and buyer:
• are not related and
• are independent of each other and
• are on an equal footing and
• are dealing with each other on a commercial basis

Rental property
Businesses that provide rental property are excluded from being qualifying businesses. If a business provides a combination of rental property and other goods/services and the applicant provides documentation that excludes the income, expenses and assets relating to the provision of rental property the remaining portion of the business may be assessed against the visa requirements.

Speculative investment
Businesses operated primarily or substantially for the purpose of speculative investment are excluded from being qualifying businesses.
Speculation includes:

• engagement in risky business transactions on the chance of a quick or considerable profit
• the purchase or sale of something for the sole purpose of making a capital gain.

Business ventures based on a high level of speculation with a great risk of potential failure, particularly if the success of the venture is dependent on external factors beyond the applicant’s control are speculative investments and are excluded from being a qualifying business.

External factors beyond the applicant’s control include:

• a potential increase in value of a commodity (for example, share trading)
• inflation (for example, capital gains from the sale of property)
• approval from an external organisation
  
  

Examples of speculative investments may include buying/selling of financial derivatives, commodity future contracts, margin trading and trading in antiques, properties, and shares.

Passive investment
Businesses operated primarily or substantially for the purpose of passive investment are excluded from being qualifying businesses.
Passive investments are money raising activities that, similar to collecting rent from rental properties, require little or no input from the applicant and might include:

• monies earned from managed investment portfolios
• capital gains from the purchase and sale of capital assets (for example, houses)
• beneficiaries of trust funds who play no other role in managing the assets of the trust.