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Australia – Recent Significant Investor Visa Programme Changes.

19 November, 2014

 


What You Need To Know

 

  • The Government has announced that it will reform the Significant Investor Visa programme to encourage more high net worth individuals to make Australia home and to leverage and better direct additional foreign investment, while maintaining safeguards to ensure the migration programme is not misused.

 
Background

 
On 14 October 2014, the Prime Minister Tony Abbott, Minister for Industry Ian McFarlane and Minister for Immigration and Border Protection Scott Morrison jointly announced an initiative to expand and improve the Significant Investor Visa programme.

 
The Significant Investor Visa Programme was established by the former Labour Government in November 2012. Its intention was to provide an alternative visa pathway for significant investors seeking to migrate to Australia1. The regulatory amendments necessary to establish this new class of visa (and the Minister’s specification of investment conditions)commenced on 24 November 2012. Amendments to certain of the investment conditions were subsequently made with effect on 23 November 2013.

 
The Significant Investor Visa

 
To qualify, visa applicants are required to:

 

  • submit an expression of interest in SkillSelect; and
  • be nominated by a State or Territory government;and
  • make investments of at least 5 million Australian dollars into “complying investments”.

 
A “complying investment” is an investment in:

 

  • a government bond (however described) of the Commonwealth, a State or Territory; or
  • a direct investment in an Australian proprietary company that meets the following requirements:
    • the company is not listed on an Australian stock exchange;
    • the company has not been established wholly or substantially for the purpose of creating compliance with this paragraph;
    • the investment is an ownership interest in the company;
  • an investment in a managed fund (directly or through an investor directed portfolio service) for a purpose specified by the Minister in an instrument, in writing, for this paragraph.

 
An applicant for a Significant Investor Visa can only invest in a managed fund (directly or through an investor directed portfolio service) that:

 

  • is a managed investment scheme (within the meaning of the Corporations Act 2001 (Cth)) in which members acquire interests in the scheme, which is not listed on a financial market (within the meaning of section 767A of the Corporations Act 2001) and where the issue of the interests in the scheme is covered by an Australian financial services licence issued under section 913B of the Corporations Act 2001; and

 

  • invests in one or more of the following assets:
    • infrastructure projects in Australia;
    • cash held by Australian deposit taking institutions (including negotiable certificates of deposit, bank bills and other cash-like instruments) ;bonds issued by the Commonwealth Government or a State or Territory government;
    • bonds, equity, hybrids or other corporate debt in companies and trusts listed or expected to be listed within 12 months on an Australian Stock Exchange;
    • bonds or term deposits issued by Australian financial institutions;
    • real property in Australia;
    • Australian agribusiness;
    • annuities issued by an Australian registered life company in accordance with section 9 or 12A of the Life Insurance Act 1995 (Cth);
    • derivatives used for portfolio management and non-speculative purposes which constitute no more than 20% of the total value of the managed fund;
    • loans secured by mortgages over many of the investments listed above; and
    • other managed funds that invest in the above list of investments.

 
The applicant must have a genuine intention to hold the complying investment for at least 4 years and to qualify for a permanent visa must have held the complying investment for at least 4 years.

 
Statistics

 
As at 30 September 2014, 1238 primary applications had been lodged for Significant Investor Visas, and 436 Visas granted. The Department of Immigration and Border Protection reports on its website that AUD 2.180bn has been invested in complying investments.

 
Victoria has been the preferred State for applicants with 221 of those visas having been nominated by Victoria. NSW is the next most active State, with 162 visas granted over the period from 24 November 2012 to 30 September 2014.

 
NSW Changes – August 2014

 
On 27 August 2014, Andrew Stoner MP, Deputy Premier of NSW Minister for Trade and Investment Minister for Regional Infrastructure and Services announced change to its Significant Investor Visa requirements to make it easier for applicants to seek NSW nomination and invest in a broader range of investments.3

 
Mr Stoner said that from 1 September, applicants seeking NSW nomination will be able to invest 100%of their funds in the complying investment of their choice. Previously, nominations in NSW were tied to a minimum investment in NSW Waratah Bonds. By comparison, nominations in Victoria were not tied to an investment in State bonds.

 
Proposed Changes – November 2014

 
An internal review in 2014 by the Department of Immigration and Border Protection found that Australia faces stiff competition from other countries with similar investor visa programmes, which often have less onerous application criteria and processing requirements.

 
The Government has announced that it will reform the programme to encourage more high net worth individuals to make Australia home and to leverage and better direct additional foreign investment, while maintaining safeguards to ensure the migration programme is not misused.

 
The changes announced include:

 

  • streamlining and speeding up visa processing, further promoting the programme globally and strengthening integrity measures, to increase the attractiveness of investing and settling in Australia while ensuring Australia’s interests are protected;
  • aligning the criteria for eligible investments with the Government’s national investment priorities. The investment eligibility criteria will be determined by Austrade in consultation with key economic and industry portfolios;
  • introducing a Premium Investor Visa (PIV), offering a more expeditious 12 month pathway to permanent residency than the SIV, for those meeting a AUD 15m threshold; and
  • tasking Austrade to become a nominating entity for the Significant Investor Visa (complementing the current State and Territory governments’ role as nominators) and to be the sole nominating entity for the PIV.

 
The changes to the Significant Investor Visa are totake effect during 2014-15, with the Premium Investor Visa to be introduced from 1 July 2015.

 

The Government will soon make further announcements on the recommendations of reviews into both the 457 visa and Significant Investor Visaprogrammes.

 
Insight

 
What is difficult to anticipate from the announcement is how integrity measures are to be strengthened. This part of the Government announcement suggests that some perceived or actual loopholes are to be closed or tightened.

 
There have been suggestions in the press that the Significant Investor Visa programme is being misused as a loophole to enable foreign purchases of established Australian homes, contrary to bipartisan foreign investment policy. Certainly it is to be noted that the criteria for a “complying investment” does not distinguish between residential and other real estate in Australia.

 
There have also been loan products created in the market targeting Significant Investor Visa applicants, the purpose of which is to enable an investor to qualify for the Visa while having the benefit of a loan made to them by a related institution. It remains to be seen whether these products will be targeted as part of the integrity review.

 

End Notes:

 

Introduced within the Business Innovation and Investment visa classes

 
2 Migration Amendment Regulation 2012 (No. 7) and Minister Chris Bowen’s specification under regulation 5.19B

 

 

Industry Innovation and Competitiveness Agenda, An action plan for a stronger Australia, October 2014

 

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For further information, please contact:

 

Lisa Simmons, Partner, Ashurst
lisa.simmons@ashurst.com

 

Homegrown International Trade Law Firms in Australia

 

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