New SIV and PIV regime – Opportunities for Fund Managers, Platform Operators and Dealer Groups
Austrade and the Department of Immigration and Border Protection (DIBP) have announced the new framework for complying investments for significant investor visa (SIV) and premium investor visa (PIV) applications to take effect on 1 July 2015.
The details are substantially in line with the consultation proposal released earlier this year, with some key changes. A major change is the inclusion of listed investment companies as an acceptable SIV investment vehicle for emerging company and balancing investments.
As anticipated, the investment requirements for both SIVs and PIVs exclude 'loan back' arrangements where the investment is used as collateral by applicants. The requirements also exclude direct investment into residential real estate, and indirect exposure through investment vehicles is limited to less than 10% of a vehicle's net assets.
The changes are designed to ensure moneys are invested into innovative Australian ideas and emerging companies, rather than passive investments such as government bonds and residential real estate funds which already attract large revenue flows.
There are potential opportunities for fund managers to set up individual or fund of fund products that meet the new investment components, for platform operators to structure investment menus to include each of the new investment components and for dealer groups to offer individual managed account products that ensure SIV investors have complying investments.
Significant Investor Visa investments
The $5 million required to be invested for a SIV may be invested in accordance with the requirements below over the qualifying period (minimum of 4 years).
With two mandatory investment components and a third optional component, each may be invested into by the holder of the SIV directly, or through a fund of funds (FOF) structure or an investor directed portfolio service (IDPS). Cash can be held for up to 30 days in the FOF or IDPS at the time of first investment or during any switching period.
There are potential opportunities here for fund managers to set up individual or FOF products that meet each of the components, for platform operators to structure investment menus to include each of the components and for dealer groups to offer individual managed account products that ensure SIV investors have complying investments.
The detail around the ability to use different collective investment vehicles for access to SIV investments and some of the finer details that will apply in relation to the operation of the various components and their permitted investments, is expected to be able to be gleaned from changes to the Migration Regulations 1994 and related instruments once they become available (although these are not expected until on or shortly before 1 July 2015).
Austrade may now nominate SIV applicants, in addition to State and Territory Governments.
Premium Investor Visas
PIVs are targeted at talented entrepreneurs and innovators. An investment of $15 million will provide an accelerated 12 month pathway to permanent residency.
Eligible investments for PIVs are set out below:
Direct Investment Managed Funds
Australian securities exchange listed assets Investments unrestricted except as set out below
Australian government or semi-government bonds or notes Indirect investment in residential real estate through investment vehicles to be limited to 10%
Corporate bonds or notes issued by an Australian exchange listed entity (or wholly owned subsidiary ) Cash to be no more than 20% of net assets
Unlisted Australian corporate bonds or notes rated investment grade by an AFS licensed debt rating agency Derivatives to be used for risk management purposes only
Australian proprietary limited companies
Real property in Australia excluding residential real estate
Alternatively, PIV investors may elect to donate all or a portion of the investment amount by way of a philanthropic donation approved by a State or Territory government.
A PIV will be available at the invitation of the Australian government only. State and Territory Governments will play a role in identifying potential applicants. Austrade alone will nominate applicants for PIVs taking into account approved criteria based on entrepreneurial skill or talent and ongoing benefit to Australia. Nominations will also be subject to a character/integrity check.
Please contact one of our managed funds specialists whose names are listed for further assistance regarding the complying status of their Funds or the set up of new Funds to meet the introduction of the new regulations which are expected to commence on 1 July 2015.
NB: This Alert has been superseded by the release of the Migration Amendment (Investor Visa) Regulations 2015 and IMMI 15/100 which took effect on 1 July 2015. Please click here for the latest information.
Author(s) Geraldine Williams and Tony Dhar