PROPOSED CHANGES TO THE SIGNIFICANT INVESTOR VISA (“SIV”) AND THE INTRODUCTION OF THE PREMIUM INVESTOR
VISA (“PIV”)
On 14 October 2014 the Australian Government announced reforms to
improve the SIV (Significant Investor Visa) programme. This includes the
introduction of a new Premium Investor Visa (PIV).
Readers
need to understand that these are only proposals and the government is assessing
feedback from interested parties before formalising the new rules.
Proposed changes to the SIV
1)
“Loan
Back” arrangements are to be excluded;
2)
The investor is prohibited from investing in
Australian Government Bonds. Instead, investors can only invest in Australian issued
corporate bonds;
3)
The
investor is prohibited from directly investing in residential real estate and
private companies;
4)
Introduction
of a new complying investment framework including two mandatory investment components
and one balancing investment component;
5)
Austrade
will also be an agency that will be responsible for nomination of what is an
approved investment alongside with state and territory governments.
The main concerns with the SIV
The
main concerns that many wealthy businessmen have with the SIV are:
1)
that
they have to hold a subclass 188 pathway visa for four years before they can be
eligible to apply for the SIV permanent residence visa;
2)
The
investor is required to stay in Australia for at least 160 days in the four
years period.
Most
wealthy businessmen would find the time period they need to spend in Australia
to be a big inconvenience impacting on their business life style.
Risks associated with the proposed changes
to the SIV
The Mandatory Investment components
Under
the new framework of complying investment proposed by Austrade, the monies that
must be invested in these two mandatory components must equal 50% of the $5m
investment.
1)
Mandatory
Venture Capital investment. the investors must invest at least $1 million out
of the $5 million in venture capital companies at the time of application;
2)
Mandatory
Micro Capitalised investment. Under the new framework of complying investment
proposed by Austrade, the investors must invest at least $1.5 million in micro
capitalized companies.
The
purpose of venture capital is of course to invest in early-stage,
high-potential and growth startup companies. Of course there are obvious risks to such
venture capital investments including:
(a)
The investment is high risk and may fail resulting in the SIV holder losing
their capital.
(b)
There
is no control for the SIV holder over the money invested in the venture capital
companies.
In
comparison with the venture capital investment, the Micro-Cap may seem less
risky. However, there are still some risky elements associated with the
Micro-Cap investment:
(a)
The
SIV investors are only allowed to invest in a public listed company with less
than $500 million market capitalisation. With such restriction on the SIV, it is likely
the investor will receive less potential returns. A listed public company with
less than $500 million market capitalisation is not large enough to render high
potential returns.
The Balancing Component
It
seems that Austrade is aware of the risks associated with the two mandatory
components. Austrade propose to use the balancing investment component to trade
off the foregoing mentioned two high-risk mandatory components.
Under
the proposed balancing components, the investor can invest in:
·
Australian
issued corporate bonds;
·
Australian
friendly society insurance bonds; and
·
Commercial
and industrial property.
Whether
the balancing investment component can lower the risks of the other two
mandatory components and its workability is the question the SIV and PIV
applicants have to ask themselves.
THE DIFFERENCE BETWEEN THE PIV AND SIV
1)
Investors
under the PIV can get permanent residency if the investor meets a $15 million
investment threshold. They have to meet the requirements of the yet to be
disclosed complying investment regime for 12 months with no residency
requirement.
2)
The
Austrade will be the sole agency which will be responsible for nominating and
monitoring the PIV requirements.
Austrade
is trying to make the PIV more flexible compared to the SIV criteria. This may
help wealthy businessmen who still need
to look after or continue management of their business before settling in
Australia.
The risks associated with the PIV
Austrade
has not released sufficient information on the proposed structure of the
complying investments for the PIV.
Austrade may adopt for the PIV, the same investment proposals outlined
for the SIV investments. If that is the case, it then follows that the PIV will
have the same risks as discussed in the proposed changes to the SIV.
However their risks will in fact be higher
as their required capital investments will be higher.
The impact on the proposed changes of the
SIV and the PIV
More
detailed information pertaining to the PIV and the SIV requirements are
expected to be released in early May 2015 by the Minister for Trade. We
will endeavor to update information on the PIV and SIV once more detailed
information becomes available.
Written with assistance from Nathan Wong
