2014-Dec 24: Clarifications on personal income requirements to sponsor parents under Family Parent Category

Visa Pak 193 - Information about clarifications on personal income requirements to sponsor parents under Family Parent Category when assessing Family Parent applications

Visa Paks

24 December 2014

Clarifications on personal income requirements to sponsor parents under Family Parent Category

The Performance and Assurance Team identified that decisions on some Family Parent applications showed a misinterpretation of the sponsor’s income requirements under the Family Parent category (F4). Sponsors (and/or their partners) are required to meet the gross income thresholds by personal income. This is to ensure that sponsors are able to meet their sponsorship obligations and reduces the risk of elderly parents not being provided for in New Zealand.

There have been cases of sponsors who are self-employed declaring the revenue prior to the deductions of business expenses as their personal income. This could result in sponsors who have personal income of much less than the required minimum being accepted as eligible sponsors. This makes it more likely that these sponsors will default on their sponsorship obligations to their parents, risking high costs to New Zealand medical and/or social services.

The concerned approach is also contradictory to IPT jurisdictions on the following cases:

DH (Parent) [2012] NZIPT 200764 [broken link removed] states that:

"Even though the wording of the instructions lacks some clarity in that there is reference to "minimum income requirement" (see F4.1.1.a), "gross minimum income requirement" (see F4.1.1.b) and "personal income" (see the Note), the intention of the instructions is nevertheless clear. The purpose of the minimum income requirement at F4.1.1 is so sponsors can demonstrate they have sufficient income (total amount) to meet their sponsorship obligations. This is a personal responsibility and attaches to a sponsor’s personal income, be it derived from employment, self-employment or investment income. The word "gross" as used in "gross minimum income" can only reasonably be construed as referring to the total amount of personal income that a sponsor has in order to satisfy the instructions. This wording cannot reasonably be construed as including the total amount of business revenue generated by a self-employed person before business expenses are paid."

GA (Parent) [2013] NZIPT 201207 [broken link removed] states clearly that:

"…’gross profit’ is not an accurate reflection of the funds that the appellant’s son has available to support the appellant and his family under the son’s obligations as sponsor" and "…assessment by Immigration New Zealand of the appellant’s son’s personal income must look at the net surplus of the partnership, after expenses of the partnership have been paid. This will provide a more accurate reflection of the actual funds the son and his wife have available, to determine whether this figure meets the minimum personal income of sponsors required by instructions".

GH (Parent) [2013] NZIPT 201268 [broken link removed] states that:

"Sole traders are personally entitled to all profits of their business…" (Rather than revenue)

Action

In assessing whether or not the gross income thresholds at F4.30.1 (tier one), F4.35.1 (tier two) and F4.1.1 (Parent Category to 16/05/2012) are met by income derived from regular self-employment, Immigration Officers should apply a sensible and purposive approach that is consistent with the objective of the instructions. Pre-expenses revenue is not "personal income" that can count in the calculation of a sponsor’s gross minimum income for the purposes of meeting the sponsorship requirements. This is because operating expenses and investment costs are deducted from the revenue and therefore not accessible by the parents being sponsored.

Business expenses claimed and the amount of personal income derived from a source other than employment are shown on a person’s Individual Income Tax Return (IR3). For more information about IR3, see http://www.ird.govt.nz/income-tax-individual/end-year/ir3

Operational Policy is currently working on amending relevant instructions to better reflect the intent of instructions. Meanwhile, Immigration Officers and Technical Advisors in family residence teams should read the enclosed IPT decisions and follow this advice when assessing sponsor’s derived from self-employment.