Significant Investor Visa - Attracting Foreign Investment from High Net Worth Individuals

Financial Services eBulletin - 19 December 2012

Summary

On 24 November, the Australian government launched the Significant Investor Visa as part of its Business Innovation and Investment Program. The Visa is expected to attract substantial investment into Australia, as it imposes relatively low eligibility requirements for foreign high net worth individuals.

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The Significant Investor Visa

On 24 November, the Australian government launched the Significant Investor Visa as part of its Business Innovation and Investment Program.

The Significant Investor Visa is designed to attract investment from high net worth individuals by offering a visa for permanent residency. It is anticipated to attract substantial interest across Asia, particularly from China.

Applicants must initially apply for a provisional visa which is granted with a four year term and entitles the holder to unlimited entry to Australia during that period. After the four year term expires, applicants may apply for permanent residency.

The visa requires investment of at least $5 million into Australia, provided that the funds to be invested are "unencumbered" and "lawfully acquired". Broadly, there are two types of qualifying investments:

  1. Direct investments into Australian private companies, provided that:
    • The company genuinely operates a business in Australia
    • The company is registered with ASIC and has an Australian Business Number
    • The applicant obtains an ownership interest in the company
  2. Unlisted managed funds that are regulated by the Australian Securities and Investments Commission and operated by an Australian Financial Services licensee. The fund must invest in qualifying assets, which include:
    • Infrastructure projects in Australia;
    • Cash held by Australian deposit taking institutions;
    • Bonds issued by the Commonwealth Government or a State or Territory government;
    • Bonds, equity, hybrids or other corporate debt in companies and trusts listed on any Australian Stock Exchange;
    • Bonds or term deposits issued by Australian financial institutions;
    • real estate in Australia;
    • Australian Agribusiness.

Once a visa application is submitted

Once a visa application is submitted, a State or Territory government must 'nominate' the applicant and may apply their own investment criteria. These requirements have not yet been fully specified.

Beyond the above criteria, there is no governmental oversight of the investment decisions and applicants may manage the investment themselves (or engage a third party to do so).

Applicants must reside in Australia for 160 days in the first four years (which can be any 160 day period, i.e. there is no minimum period per annum).

Interestingly, many of the requirements under the skilled migrant visa rules do not apply to the Significant Investment Visa. No upper age limit applies to applicants, there is no business skills points test and no English language requirement. Basic health and character requirements apply.  

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Gauging demand and structuring complying products

Many fund managers and major banks are in the process of gauging demand and structuring complying products. In doing so, there are several features and conditions of the program which should be noted, particularly for managed funds.

The fund must be available to the public and the fund operator must provide a compliance certificate confirming compliance with the requirements of the Department of Immigration and Citizenship.

Applicants must maintain the investment during the initial four year term of the provisional visa. During this time, the value of the investment may fall below $5 million and applicants do not need to top it up. Applicants may not make withdrawals which take the balance invested below $5 million. Even if the value of the investment increases above $5 million, applicants may not make withdrawals to take the sum back to $5 million but must maintain the full investment.

Switching between complying investments is, however, permitted.

Investments held before the visa application is made may be counted toward the $5 million sum but the total investment must be held for four years from the date the provisional visa is granted.

After the permanent visa is granted, there is no requirement to maintain the investment but applicants must have a 'genuine intention' of maintaining business or investment activities in Australia.

Finally, the broader compliance implications of offering investments to offshore investors should also be borne in mind, including:

    • The requirements of anti-money laundering regulations;
    • Tax issues, including the US Foreign Account Tax Compliance Act for US investors;
    • Offshore fund registration requirements;
    • Currency transfer restrictions of the investor's home country;
    • Implications of the Future of Financial Advice reforms on payment arrangements with brokers and other advisory intermediaries who broker investments by applicants.

 

Bottom Line

The Significant Investment Visa is expected to attract substantial investment into Australia, as it imposes relatively low eligibility requirements for foreign high net worth individuals.Private wealth in Asia and particularly China is historically high and this visa provides a new avenue for Australian businesses and managed funds to tap this market. The challenge for fund managers will be to access this market in a way which complies with both the migration regulations and financial services laws.

All information on this site is of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific legal professional advice. No responsibility for the loss occasioned to any person acting on or refraining from action as a result of any material published can be accepted.

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