Introduction

Fund managers should closely follow the implementation of proposed changes to the business investor visa regime announced by the Government in October 2014. Following a review into the Business Innovation and Investment Programme, which covers the Business Innovation and Investment (Provisional) visa (subclass 188) (Sub Class 188 Visa), the Australian Government announced refinements to the Significant Investor stream (SIV) of Sub Class 199 Visa as a result of the review. Fund managers may need to reconsider and amend the structure and documentation of new and existing SIV managed investment schemes in light of the proposed refinements. Fund managers may also take advantage of a new streamlined pathway for premium (A$15 million) investors.

Refinements to SIV

Some of the refinements include:

  • Prohibition on encumbering complying investments or using the investment as security for a loan
  • Residence requirement of 180 days per year for secondary (family) applicants
  • Austrade being introduced as a nominator, in addition to the Australian states and territories, in order to focus on investment in the right sector
  • Allowance of 'role swapping' between primary and secondary applicants during the provisional visa stage in order to meet residency requirements

Whether the above changes will have any significant impact on the flow of SIV applications is yet to be seen. As at 30 September 2014, more than $2.18 billion had had been invested in Australia by primary applicants for SIV visa, and there are another 595 applicants, or just over $3 billion of investments, in the pipeline.1

New additional investor gateway

The Sub Class 188 visa already contains three streams - Business Innovation, Investor, and SIV. In short, the SIV is a state or territory nominated pathway to provide for significant migrant investment into Australia under the Business Innovation and Investment visa programme and requires the applicant to invest at least $5 million into complying investments for a minimum of 4 years.

The Government has announced the introduction of a new fourth stream – the Premium Investment stream (PIV). The PIV is intended to be a more expeditious, 12 month pathway to permanent residency than the Significant Investor stream. A PIV applicant will require an investment of $15 million into approved investments.

SIV and PIV – key differences

The key differences between the SIV stream and proposed PIV stream are highlighted below.

Features

Significant investor visa

Premium investor visa

Timeframe for permanent residency 

The significant investor (sub class 188) visa is a provisional visa, valid for four years that has a pathway to permanent residency.

By applying under the premium investor visa stream, applicants will have an opportunity for permanent residence after 12 months of maintaining their investment.

Nomination requirement

Applicants must be nominated by a state or territory government before being invited to apply for this visa.

A proposed change to the SIV stream is that Austrade will also be a nominating agency.

Nomination will be exclusively by Austrade.

Minimum investment amount

Applicants must make a 'complying investment' of at least A$5 million in Australia.

Applicants must invest at least A$15 million into 'complying investments'.

Complying investment

A 'complying investment' generally includes one or more of the following:

  1. Australian State or Territory bonds
  2. An investment in a managed fund for a purpose specified by the Minister in an instrument, in writing, as shown below:
  1. infrastructure projects in Australia;
  2. cash held by Australian deposit taking institutions (including negotiable certificates of deposit, bank bills and other cash-like instruments);
  3. bonds issued by the Commonwealth Government or a State or Territory Government;
  4. bonds, equity, hybrids or other corporate debt in companies and trusts listed (or  expected to be listed within 12 months)  on any Australian Stock Exchange;
  5. bonds or term deposits issued by Australian financial institutions;
  6. real property in Australia;
  7. Australian Agribusiness;
  8. annuities issued by an Australian registered life company in accordance with section 9 or 12A of the Life Insurance Act 1995
  9. derivatives used for portfolio management and non-speculative purposes which constitute no more than 20 per cent of the total value of the managed fund
  10. loans secured by mortgages over the investments listed in (b)(i) to (viii) above
  11. other managed funds that invest in the above list of investments.

There is suggestion that the above list may change to align the criteria for complying investments with the Government's national investment priorities.2 This could mean, for instance, changes to the list of eligible managed fund investments that SIV compliant managed funds could invest in, either on a class of assets basis or on a case-by-case basis.

Austrade will assume policy responsibility for determining what constitutes a complying investment for the purposes of PIV.

Austrade is still in the early stages of deliberation with regard to these new policy responsibilities (and intends to consult with stakeholders as part of the process for reviewing complying investment policy settings for PIV and SIV)3.

Based on the Government's suggestion to align the criteria for complying investments with the Government's national investment priorities it is likely that any investment parameters set by Austrade will be in line with the federal government's national investment policy.4

Potential investment sectors could include5:

  • food and agribusiness
  • mining equipment technology and services
  • oil, gas and energy resources
  • medical technologies and pharmaceuticals
  • advanced manufacturing

State restrictions on investment apportionment 

Each Australian state has their own requirements as to how the A$5 million must be apportioned among complying investments.

Applicants seeking a NSW nomination will continue to be able to invest 100 per cent of their funds into 'complying funds' of their choice.6

See above. The Government has not yet released any apportionment requirements regarding investment in complying investments.

Other restrictions

Applicants will be prohibited from using complying investments as security for loans.

This would, for instance, affect managed funds which allow investors to borrow against their investment and repatriate those borrowed funds overseas.

At this stage no encumbrance restriction has been specified.

However given an objective of PIV is to enhance the inflow of foreign investment into Australia, it seems likely that any borrowing against complying investments and repatriation overseas would be restricted (ie to be consistent with that objective).

Residency requirement

Currently, the visa requires the primary applicant to be present in Australia for at least 40 days for every year or part year that they have held a provisional Significant Investor visa.

The residence period does not need to be met per year but can be met cumulatively over the time the primary visa holder held the provisional visa.

Accordingly during the course of the four year visa term, the applicant needs to reside in Australia for a minimum of 160 days (cumulatively).

The Government intends to introduce a new 180 day per year residency requirement for secondary SIV applicants (ie. family members of the primary SIV applicant).

The residence requirements for primary applicants remain unchanged.

At this stage, no minimum residency requirement for either primary or secondary applicants.

 
Visa extensions

Applicants can apply for a maximum of two additional two year extensions on their provisional visa.

At the time of applying for an extension, the applicant must have held a provisional Significant Investor stream visa for at least three years or have not held more than one provisional visa in the Significant Investor Extension stream.

 It has not yet been announced whether extensions will be permitted under PIV.

Next steps

It is intended that the proposed changes to SIV will take effect during 2014-15, with PIV to be introduced from 1 July 2015. New and existing managed investment schemes offering complying investments may need to be adapted to address the proposed changes.

The Government has yet to release any draft legislation on PIV and the above proposed changes to SIV.

Footnotes

1Speech by Senator Michaelia Cash at Migration Institute of Australia 2014 Conference, Canberra http://www.minister.immi.gov.au/media/mc/2014/mc218908.htm
2See the 'Industry Innovation and Competiveness Agenda', page 56 http://www.dpmc.gov.au/publications/Industry_Innovation_and_Competitiveness_Agenda/docs/industry_innovation_competitiveness_agenda.pdf
3Speech by Senator Michaelia Cash at Migration Institute of Australia 2014 Conference, Canberra http://www.minister.immi.gov.au/media/mc/2014/mc218908.htm
4ibid
5See joint release by the Government dated 14 October 2014 outlining the 'Industry Innovation and Competiveness Agenda' http://www.dpmc.gov.au/publications/Industry_Innovation_and_Competitiveness_Agenda/docs/industry_innovation_competitiveness_agenda.pdf
6Prior to 1 September 2014, the NSW Government required that at least 30% of the applicant's investment is in NSW State Government Bonds (also known as Waratah Bonds) as a condition for nomination.