Amendments to SIV and PIV

 
 

From 1 July 2015, the Premium Investor stream (PIV) was introduced to the subclass 188 visa together with amendments to the Significant Investor stream (SIV), in particular the ‘Complying Investment Framework’.  There were concerns that the SIV had not been appropriately designed to attract investment into sectors for the national interest and the majority of investments were essentially being funneled into residential property (even though direct investment in residential property was prohibited).

The Government made amendments where Austrade has been tasked with the active role of selecting prospective applicants for the PIC. In addition, under the Complying Investment Framework, additional restrictions have been place with regard to acceptable investments.

On its website, Austrade provides the following details regarding the amendments:

Changes to the Significant Investor Visa (SIV) and the introduction of a Premium Investor Visa (PIV) have now commenced. The new Complying Investment Framework for the Significant Investor Visa (SIV) and introduction of the Premium Investor Visa (PIV) are aimed at attracting applicants with business and entrepreneurial skills and capital to enhance investment into innovative Australian businesses and the commercialisation of Australian ideas, research and development.

The SIV and PIV are part of the Government’s Industry Innovation and Competitiveness Agenda announced by the Prime Minister in October 2014. Following the announcement, Austrade undertook extensive consultations with interested stakeholders, including public consideration of complying investment design options through two rounds of public written submissions (receiving approximately 170 submissions).

Under the new arrangements, SIV applicants will be required to invest at least $5 million over four years in complying investments, which must now include:

  •      At least $500,000 in eligible Australian venture capital or growth private equity (VCPE) fund(s) investing in start-up and small private companies. The Government expects to increase this to $1 million for new applications within two years as the market responds;
  •      At least $1.5 million in an eligible managed fund(s) or Listed Investment Companies (LICs) that invest in emerging companies; and,
  •      A ‘balancing investment’ of up to $3 million in managed fund(s) or LICs that invest in a combination of eligible assets that include Australian listed securities, eligible corporate bonds or notes, annuities and real property (subject to the 10 per cent limit on residential real estate).

Previously, investment through the SIV programme was largely going into passive investments like government bonds and into residential real estate schemes – areas that already attract large capital flows. Direct investment in real estate has never been a complying investment for SIV and this will not change under the new arrangements. Indirect investment in residential real estate through managed funds will also now be limited. Importantly, a SIV holder can still independently invest in residential real estate so long as it complies with foreign investment rules, but this would not count as a complying investment to qualify for a visa.

The Premium Investor Visa (PIV) has been introduced to attract a small number of highly talented and entrepreneurial individuals who can translate those skills and talents into areas which deliver a long-term economic benefit to Australia. The PIV will be available at the invitation of the Australian Government only, with potential recipients to be nominated by Austrade. Please note, the Government will be highly selective in determining who is offered the opportunity to apply for a PIV, and unsolicited expressions of interest will not be accepted. The programme will be developed in Australia’s top two-way investment market, the United States, in the first instance and then gradually expanded to other top two-way investment markets.

The background to these changes is best set out in an article in The Australian newspaper:

On 23 October, 2014, The Australian newspaper reported as follows:

THE federal government has signalled a major overhaul to the significant investor visa program as it looks to divert the billions of dollars raised from the scheme away from low-risk investments such as government bonds into areas such as venture capital and small-cap companies.

The Abbott government also plans to tighten scrutiny surrounding the visa program, as well as the newly announced $15 million premium investor visa scheme, amid concerns some ­people with criminal links and corrupt officials could be exploiting the program to fast-track their entry into Australia.

Since the significant investor visa program was launched two years ago, close to $2 billion has poured into mostly ultra-safe government bonds, an ASIC-regulated managed fund or shares in blue-chip companies.

But Trade and Investment Minister Andrew Robb believes the money going into low-risk bonds makes no real contribution to Australia’s economic growth.

“If (the funds) are going to government bonds, which could be sold anytime and anywhere at a good price, Australia is getting nothing out of it,” Mr Robb told The Australian. “They just park money there for four years and got citizenship. It does not make a lot of sense to me from a public policy point view.”

Instead, the government wants to channel these new funds from wealthy investors — mostly Chinese nationals — into areas where companies are starved of capital such as start-ups, small-cap companies and early-stage exploration companies.

“My view is that we should channel investment into areas of relatively higher risk,” he said.

“In those areas, the few hundred million additional dollars ­invested into venture capital space, for instance, would be transformational. It could make a real difference.”

The new premium investor visa program, which offers fast-tracked Australian citizenship in 12 months, requires investors to put at least $15m into the economy. So-called sponsorship of the visa applicant becomes the responsibility of the state or territory governments.

Mr Robb said Australian citizenship was highly prized among international investors and the additional risks that they must carry warranted the benefits of becoming an Australian citizen.

“I think what is being offered is a very valuable thing in terms of fast-tracked citizenship,” he said.

“I do feel this warrants investment that makes a material difference to Australia, not just sitting in low-risk accounts for four years, not making any contribution to the country.”

It is the government’s intention to channel investor money into these new areas through existing vehicles that have been tried and tested over time, such as the Early Stage Venture Capital Limited Partnership, which is registered with the Department of Industry as well as the ATO.

“We feel this SIV and PIV could make a very material contribution in terms of lowering costs and getting ventures off the ground,” he said.

Of the 436 people awarded significant investor visas as of last month, 88 per cent were Chinese.

Australia’s investor visa program has been under the spotlight due to its alleged connection to money-laundering as well as potential exploitation by Chinese ­officials amid a crackdown by Beijing on corruption.

Australian Federal Police has recently announced an unprecedented co-operation with the Chinese law enforcement authorities in tracking down economic fugitives as well as seizing ill-­gotten goods and property in ­Australia. Mr Robb defended the overall integrity of the visa programs, which are administered by the Department of Immigration, saying there had not been a problem with SIV to his knowledge.

“There is co-operation between our two police authorities to try to flush out some of these corrupt officials,” he said.

“We are re-assessing integrity measures.”

The minister also said that the Australian immigration authority would refer cases to Chinese police if any improprieties were discovered during the mandatory security and character screening process.

“If there is any suggestion that a person has accumulated wealth through illegitimate means, all materials are referred to local authorities in the source countries and in the case of China, to the Chinese police,” he said.

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Barbara DavidsonD) Amendments to SIV and PIV