The Australian Government has released its final policy on changes to the Significant Investor Visa (SIV) Program, to be effective 1 July 2015. The SIV will still require a AUD$5 million investment to be made in Australia, however there have been a number of changes to permitted investments.

Premium Investor Visa

In addition to the SIV, a Premium Investor Visa (PIV) will be offered from 1 July 2015, which will require a AUD$15 million investment in Australia. The PIV will enable successful applicants to obtain permanent residency after an accelerated period of 12 months. Austrade will be responsible for recommending applicants for PIV. However, the States and Territories will be 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 will be in Australian managed funds or direct investments in:

• Real property in Australia other than residential property

• Deferred annuities

• Charitable donations approved by States or Territories

• Australia proprietary limited companies

• Corporate bonds or notes issued by an Australian exchange listed entity (or its wholly owned subsidiary)

• Investment grade rated Australian corporate bonds or notes rated by an AFS licensed rating agency

• Australian government or semi-government bonds or notes; or

• Australian exchange listed assets.

Where the investment is in a managed fund, cash must not make up more than 20% of the fund’s net assets and derivatives must be used only for risk management purposes.

SIV Changes

Under the SIV changes Austrade will also be one of the referring agencies able to make recommendations for the SIV (in addition to the current bodies, being the States and Territories).

No new applications for SIV are currently being accepted by the Australian government- the old program was suspended on 24 April 2015. However, applications under the new regime will commence on 1 July 2015.

There are a number of changes to permitted SIV investments. The current SIV requirements and the new changes are set out as follows:

Current SIV investment mix

Total: AUD $5 million

*Permitted investments for managed funds:

• Infrastructure projects in Australia.

• Cash held in Australian ADIs.

• Australian Government bonds.

• Bonds, equity, hybrids or other corporate debt in companies and trusts listed on any Australian stock exchange (or expected to be listed within 12 months).

• Real estate in Australia.

• Australian agribusiness.

• Annuities which are life policies issued by an Australian registered life company.

• Derivatives used for portfolio management and non speculative purposes (which are not more than 20% of the total value of the managed fund).

• Loans secured by mortgages over the investments listed above (other than derivatives).

• Other ASIC regulated managed funds that invest in the above list of investments.

New SIV investment mix

Total: AUD $5 million

Venture Capital Funds

• Investment in Australian venture capital limited partner fund.

• Fund must be Australian Industry registered under the Early Stage Venture Capital Limited and Venture Capital Limited Partnership programs.

* expected to increase to $1m after 2 years

Funds/Listed Investment Companies investing in Emerging Companies

• Permitted investments will be in managed funds or listed investment companies (LICs) which invest in:

  - Securities of companies which have a market capitalisation of < $500m at time of purchase. Investments can be in:

  a.Australian ASX listed companies

  b.Australian unlisted companies (must not exceed 20% of the fund’s net assets)

  - Other Australian exchange listed companies (must not exceed 20% of the fund’s net assets).

  - Foreign exchange listed companies with a market capitalisation of < $500m at time of purchase (must not exceed 10% of the fund’s net assets).

• Minimum 20 investee companies.

• 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 asset must not exceed 10% of the fund’s net assets.

• Cash holdings must not exceed 20% of the fund’s net assets.

• Derivatives must be used only for risk management purposes.

• Fund manager must manage at least $100 million funds under management, or offer products through a responsible entity that meets this criteria.

Balancing Investment

• Permitted investments will be in managed funds, Australian friendly society insurance bonds or LICs.

• The managed fund or LIC must invest in:

  - Deferred annuities issued by Australian registered life companies, but paybacks cannot commence during the provisional visa period.

  - Australian exchange listed companies, Australian real estate investment trusts, infrastructure trusts, preference shares, convertible bonds, corporate issued floating rate notes.

  - Corporate bonds or notes issued by an Australian exchange listed entity (or its wholly owned subsidiary).

  - Investment grade rated Australian corporate bonds or notes rated by an AFS licensed rating agency.

  - Australian real property (subject to a 10% limit on residential real estate).

• Cash holdings must not exceed 20% of the fund’s net assets.

• Derivatives must be used only for risk management purposes.

• Fund manager must manage at least $100 million funds under management, or offer products through a responsible entity that meets this criteria.

Author: Adeline Hiew (Partner at Holding Redlich)

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