The Australian Government has made regulations which implement:
a new Premium Investor Visa (PIV) program; and
its proposed changes to the Significant Investor Visa (SIV) Program,
from 1 July 2015.
The SIV still requires an AUD$5 million investment to be made in Australia, however there have been a number of changes to permitted investments.
Premium Investor Visa
The PIV is a new visa stream available from 1 July 2015. The PIV requires an AUD$15 million investment in Australia. The PIV enables successful applicants to obtain permanent residency after an accelerated period of 12 months. Austrade is responsible for recommending applicants for PIV. However, the States and Territories are able to make referrals of applicants to Austrade. The assessment will be made on an individual basis.
The PIV is aimed at attracting business skills and entrepreneurial talent to Australia which are aligned to National or State and Territory investment priorities. Permitted investments may be through Australian managed investment funds[1], LICs or direct investments in only one or more of the following:
Annuities issued by a life company, where the annuity does not repay capital during the period of the visa
Philanthropic contributions approved by States or Territories
Australian proprietary limited companies
Corporate bonds or notes issued by an Australian exchange listed entity (or its wholly owned Australian subsidiary)
Investment grade rated Australian corporate bonds or notes rated by an AFS licensed rating agency
Australian government or semi-government bonds or notes
Cash (for investments through managed funds only) held by Australian ADIs (including certificates of deposit, bank bills and other cash-like instruments) - but cash must not make up more than 20% of the fund’s net assets
Derivatives - but these must be used only for risk management purposes
Australian exchange listed securities; or
Commercial real property in Australia.
Direct investments into residential real property cannot be made, however, indirect investments can be made through a managed fund, provided the fund’s residential real property investments do not exceed 10% of the net value of the fund’s assets.
In any case, an indirect residential real property investment may not be made if it is for the dominant purpose of:
deriving financial benefits; or
assisting the investor, investor’s spouse or de facto partner, or any member of any of their families, to reside in or gain legal ownership in Australian residential real property.
Significant Investor Visa
The changes to the SIV program came into effect on 1 July 2015.
Austrade is now one of the referring agencies able to make recommendations for the SIV (in addition to the States and Territories).
There have been a number of changes to permitted SIV investments. The new arrangements are set out as follows:
New SIV investment mix
Total: AUD $5 million
* Expected to increase to $1m after 2 years.
Venture Capital Funds
Investment in one or more Australian venture capital limited partner funds.
Fund must be Australian Industry registered under the Early Stage Venture Capital Limited and Venture Capital Limited Partnership programs.
No later than 12 months after the visa is granted, and anytime after the investor’s visa application is made, the investor must enter into an agreement with the general partner of each venture capital fund committing to the minimum AUD 500,000 investment requirement in total, across one or more venture capital funds. The amount of each investment in a venture capital fund must be held in escrow in favour of the fund’s general partner, or as security for a guarantee issued by an Australian ADI in favour of the general partner.
At the time that the decision is made about the investor’s visa, at least AUD 500,000 must be held in escrow or as security, as described above, or on deposit for investment in either a cash management trust or trusts, or an Australian ADI, or both.
A substantial part of the total amounts held in escrow or as security (not including any investment fees), must be invested during the period the visa is in effect.
Funds/Listed Investment Companies investing in Emerging Companies
Permitted investments may be through one or more managed investment funds[1] or listed investment companies (LICs). The issuer of these interests must have a minimum $100m funds under management (FUM) in Australia and the investments must be made in one or more of the following:
- Securities of companies which have a market capitalisation of < $500m at time of purchase. Investments can be in:
o Australian ASX listed companies
o Australian unlisted companies[2] (must not exceed 20% of the fund’s net assets)
o Other Australian exchange listed companies (must not exceed 20% of the fund’s net assets).
o Foreign exchange listed companies (must not exceed 10% of the fund’s net assets).
- Cash held by Australian ADIs, including certificates of deposit, bank bills and other cash-like instruments - but these must not exceed 20% of the fund’s net assets.
- Derivatives - but these must be used only for risk management purposes.
The investment must be maintained in securities issued by 20 or more different issuers.
Up to 30% of the fund’s net assets can be held in investee companies which have grown their market capitalisation >$500 million.
Investment in an individual security must not exceed 10% of the fund’s net assets.
The investment must not be made in securities issued or proposed to be issued by a government, or in debentures.
Balancing Investment
Permitted investments may be through one or more managed investment funds[1] or LICs.
The investment vehicle may invest only in one or more of the following:
- Securities of a company, real estate investment trust, or an infrastructure trust, provided they are quoted on an Australian securities exchange.
- Annuities issued by Australian registered life companies, but repayment of capital cannot commence during the visa period.
- Corporate bonds or notes issued by an Australian exchange listed entity (or its wholly owned Australian subsidiary).
- Investment grade rated Australian corporate or registered foreign company bonds or notes rated by an AFS licensed rating agency.
- Australian real property (subject to a 10% limit on residential real estate[3]).
Cash held by Australian ADIs, including certificates of deposit, bank bills and other cash-like instruments, must not exceed 20% of the fund’s net assets.
Derivatives must be used only for risk management purposes.
Australian Financial Services Licensing (AFSL) Requirements
The general partner of a venture capital fund, trustee or responsible entity of a managed investment scheme, issuer of shares in an LIC, insurer or investment manager in relation to the above investment vehicles, must hold an AFSL or be exempt from the need to hold one. Further, they must have their central management and control in Australia and be unrelated to the investor, their spouse or de facto partner.
[1] Includes financial products issued by Friendly Societies and Life Companies. Managed investment fund investments can be held through an IDPS or fund of funds.
[2] Includes Australian real estate investment trusts and infrastructure trusts.
[3] No direct residential real property investment may be made through the fund or LIC. The value of all indirect residential real property investments made through the fund or LIC must be no more than 10% of the value of the fund’s net assets. The investment must not be made for the dominant purpose of deriving financial benefits, or of assisting the investor, investor’s spouse or de facto partner, or any member of any of their families, to reside in or gain legal ownership in Australian residential real property.
Author: Adeline Hiew (Partner at Holding Redlich)
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Business set up in Australia, business structures, company administration, etc.
Background information of Australia, including Australian government, legal system, and business structures, etc.
Laws and regulations in various common areas, including protection of technology and intellectual property, anti-trust and consumer law, contract law, business migration, real property, public takeovers, and electronic commerce etc.
Professional industrial updates and insights, such as regulation on foreign investment
