Yesterday the Minister for Trade and Investment and the Assistant Minister for Immigration and Border Protection announced the commencement of the revised Significant Investor Visa (SIV) regime and new Premium Investor Visa (PIV) regime. The announcement closely follows the release of amending regulations to the Migration Regulations, and a ministerial instrument detailing specific requirements for complying investments for each regime.

The SIV and PIV regimes offer pathways to Australian permanent residency for high net worth international investors. The SIV regime requires a $5 million complying investment for four years and the PIV regime requires a $15 million complying investment for 12 months.

SIV 2.0: a major overhaul to the complying investment framework

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Under the new SIV regime, investors must invest at least $5 million in complying investments, which now must include:

  • at least $500,000 in eligible Australian venture capital funds (the Government expects to increase this to $1 million for new applicants within two years);
  • at least $1.5 million in eligible managed funds (including LICs) that invest predominantly in securities in ASX listed micro-cap and small-cap companies; and
  • a ‘balancing investment’ of up to $3 million in managed funds or LICs that invest in a broader range of eligible assets.

The changes to the new SIV program are designed to redirect investment from low risk investments, such as government bonds, which already attract large capital flows, into more innovative and emerging sectors.

The SIV overhaul presents significant opportunities for small-cap and venture capital fund managers to source new capital. As with other SIV ventures, we expect that the key for such managers in launching successful SIV offerings will be establishing effective distribution channels in key investor migrant markets.

VC funds

SIV investors must invest at least $500,000 in one or more venture capital funds (registered under the Venture Capital Act). VC fund investment requirements include:

  • within 12 months of the visa application, the applicant must enter into a commitment agreement with one or more VC fund general partners, and must fully fund that commitment (either directly, or through escrow arrangements); and
  • a substantial portion of the VC funds’ capital must be invested during the four year visa period.

Emerging companies funds

SIV investors must invest at least $1.5 million in managed investment funds investing in eligible emerging companies (with a market cap of less than A$500 million at the time of acquisition), including:

  • ASX quoted securities (uncapped);
  • securities quoted on other Australian stock exchanges (capped at 20% of NAV);
  • unquoted securities (capped at 20% of NAV); and
  • securities quoted on a foreign stock exchange (capped at 10% of NAV).

Securities in entities which, subsequent to acquisition by a fund, exceed the $500 million market cap threshold must not exceed 30% of the fund’s NAV. The fund must hold securities issued by at least 20 different issuers within 3 months of making its first investment. No more than 20% of the fund’s net assets may be invested in cash.

Balancing investments

The balance of a SIV applicant’s $5 million investment, if any, must be invested in a managed investment fund which invests in:

  • securities issued by ASX listed companies, REITs, and infrastructure trusts;
  • bonds or notes issued by:
    • an Australian listed company, or a wholly owned Australian subsidiary of an Australian listed company; or
    • an Australian company or foreign company registered in Australia, if the bonds or notes are rated as investment grade by a credit rating agency that holds an AFS licence;
  • deferred annuities issued by Australian registered life companies;
  • real property in Australia (capped at 10% of NAV for residential real property);
  • cash held by Australian ADIs (capped at 20% of NAV); and
  • derivatives (uncapped, but limited to risk management investments).

General

Existing eligibility requirements for SIV applicants are largely unaffected, except that Austrade will now, along with State and Territory governments, be responsible for processing visa nominations.

Funds used to make SIV investments continue to be subject to a requirement that they be lawfully acquired and unencumbered. However, to prevent “loan-back” arrangements, SIV investments are now prohibited from forming the basis of collateral or security for a loan.

Additional requirements are imposed on fund managers, including a minimum FUM requirement of $100 million (VC fund GPs are excluded) and independence from SIV investors.

Grandfathering for existing SIV applications

The existing SIV regime will continue to apply to all SIV applications made before 1 July 2015.

Premium Investor Visa

The new PIV program also commenced on 1 July 2015. The PIV program provides a 12-month pathway to permanent residency, requiring a $15 million investment in a broader range of eligible investments. The scope of eligible PIV investments (either though Australian managed investment funds, or by direct investment) includes:

  • Australian quoted securities;
  • bonds or notes issued by:
    • an Australian government or semi-government issuer;
    • an Australian listed company, or a wholly owned Australian subsidiary of an Australian listed company; or
    • an Australian company or foreign company registered in Australia, if the bonds or notes are rated as investment grade by a credit rating agency that holds an AFS licence;
  • Australian proprietary limited companies;
  • deferred annuities issued by Australian registered life companies;
  • real property in Australia (capped at 10% of NAV for residential real property);
  • if invested via a managed fund:
    • cash held by Australian ADIs (capped at 20% of NAV); and
    • derivatives (uncapped, but limited to risk management investments); and
  • State or Territory government approved philanthropic donation.

As with the SIV regime, PIV investments are prohibited from forming the basis of collateral or security for a loan.

A PIV application must be at the invitation of Austrade, with State and Territory governments able to make referrals to Austrade.

More information

Information on the complying investment framework, including a link to frequently asked questions (FAQs), can be found here.

Further information on the visa requirements and process of applying for the visas can be found on the Department of Immigration and Border Protection’s webpage.

The Migration Regulations can be accessed at:https://www.comlaw.gov.au/Details/F2015L00963

The Migration Instrument can be accessed at:https://www.comlaw.gov.au/Details/F2015L01012