New PIV

 
 

Below is the legislative framework for the PIV:

188.27—Criteria for Premium Investor stream

Note:   These criteria are only for applicants seeking to satisfy the primary criteria for a Subclass 188 visa in the Premium Investor stream.

188.271

            The applicant was invited, in writing, by the Minister to apply for the visa.

188.272

  (1)     The applicant has made, on or after the time of application, a complying premium investment (within the meaning of regulation 5.19D as in force at the time of application) of at least AUD 15 000 000.

  (2)     The applicant has a genuine intention to hold the complying premium investment for the whole of the visa period (except any part of the investment that is a philanthropic contribution).

Note:   A complying premium investment may be based on one or more investments or one or more philanthropic contributions, or a combination of both.

188.273

  (1)     The applicant has given the Minister evidence that the investment complies with the requirements set out in regulation 5.19D as in force at the time of application.

  (2)     The applicant has given the Minister a completed copy of approved form 1412, signed by the applicant and each other applicant aged at least 18.

Note:   Approved form 1412 is a deed of acknowledgement, undertaking and release, signed by each person mentioned in subclause (2), under which they:

(a)  acknowledge that they are responsible for their financial and legal affairs; and

(b)  undertake not to bring an action against the Commonwealth in relation to any loss relating to the complying premium investment; and

(c)   release the Commonwealth from any liabilities in relation to any loss relating to the complying premium investment.

188.274

  (1)     The applicant satisfies public interest criterion 4005.

  (2)     Each member of the family unit of the applicant who is an applicant for a Subclass 188 visa satisfies public interest criterion 4005.

  (3)     Each member of the family unit of the applicant who is not an applicant for a Subclass 188 visa satisfies public interest criterion 4005 unless it would be unreasonable to require the member to undergo assessment in relation to the criterion.

Here is Reg 5.19D :

5.19D  Complying premium investment

Definition

  (1)     An investment or a philanthropic contribution, or a combined investment and philanthropic contribution, by a person (the investor) is a complying premium investment if all of the requirements of this regulation are met.

  (2)     If an investment (the overall investment) is based on one or more other investments, this regulation (and any instrument under subregulation (8)) applies equally to the overall investment and each investment on which the overall investment is based.

  (3)     If a philanthropic contribution (the overall contribution) is based on one or more other philanthropic contributions, this regulation applies equally to the overall contribution and each philanthropic contribution on which the overall contribution is based.

Investment and philanthropic contribution requirements

  (4)     All funds used to make an investment or philanthropic contribution (or both) must be unencumbered and lawfully acquired.

  (5)     An investment or philanthropic contribution (or both):

            (a)          must be lawful; and

            (b)          must not form the basis for security or collateral for a loan.

Philanthropic contribution requirement

  (6)     A philanthropic contribution must be approved for this regulation, in writing, by a State or Territory government agency.

Investment requirements

  (7)     An investment, and the means by which an investment is made:

            (a)          must be of a kind permitted by the requirements specified in an instrument under subregulation (8); and

            (b)          must comply with any requirements specified in an instrument under subregulation (8).

  (8)     The Minister may, by legislative instrument, specify requirements for the purposes of subregulation (7).

Investment switching periods

  (9)     Subregulation (10) applies in relation to a period (the switching period):

            (a)          beginning when the investor withdraws funds from an investment, or cancels an investment; and

            (b)          ending when the investor reinvests the withdrawn funds, or the funds used to make the cancelled investment.

(10)     If the switching period is of no more than 30 days duration, the investment (whether or not combined with a philanthropic contribution) is taken not to have ceased to be a complying premium investment during the switching period only because of the event mentioned in paragraph (9)(a).

Investor requirements

(11)     The investor must be an individual.

(12)     The investor must make an investment or philanthropic contribution (or both):

            (a)          personally; or

            (b)          with the investor’s spouse or de facto partner; or

            (c)          by means of a company that has issued shares and in which:

            (i) the investor holds all of the issued shares; or

            (ii) the investor and the investor’s spouse or de facto partner hold all of the issued shares; or

            (d)          by means of a trust to which the following applies:

            (i) the trust is lawfully established;

            (ii) the investor is the sole trustee or the investor and the investor’s spouse or de facto partner are the sole trustees;

            (iii) the investor is the sole beneficiary or the investor and the investor’s spouse or de facto partner are the sole beneficiaries.

Note:   Regulations 5.19E and 5.19F are reserved for future use.

Here is the Schedule 1 criteria:

1202B.  Business Skills (Provisional) (Class EB)

(6C) An applicant seeking to satisfy the primary criteria for a Subclass 188 visa in the Premium Investor stream must meet the requirements in the table.

ItemRequirements

1The applicant must have been invited, in writing, by the Minister to apply for a Subclass 188 (Business Innovation and Investment (Provisional)) visa in the Premium Investor stream

2The applicant must apply for that visa within the period stated in the invitation

3The applicant must be nominated by the CEO of Austrade

Note:      The invitation to apply for the visa will identify the stream to which the invitation relates.

Note that Austrade will be basically administering this visa stream as it does for the Significant Investor stream.

Significant Investor Visa

Unpacking the Significant Investor Visa

The Criteria for Significant Investor stream of the Business Innovation and Investment (Provisional) (Subclass 188) visa is no longer just about investing $5 million in Australia. The government was initially disappointed that the most common $5 million investment made was into ultra-safe state government bonds.

Now there is a complex list of requirements as to how that $5 million must be invested. $500,000 must be invested in ‘venture capital funds’ and $1.5 million must be invested in ‘emerging companies investments’.  Here is the pivotal provision (which is a time of decision criteria) :

[188.252] (1)   The applicant has made, on or after the time of application, a complying significant investment (within the meaning of regulation 5.19C as in force at the time of application) of at least AUD 5 000 000.

[188.252] (2)   The applicant has a genuine intention to hold the complying significant investment for at least 4 years.

Reg 5.19C   Complying significant investment sets the parameters :

(1)  An investment by a person (the investor) is a complying significant investment if all of the requirements of this regulation are met.

Here are the prerequisite requirements Reg 5.19C :

Investment requirements

(3)  All funds used to make the investment must be unencumbered and lawfully acquired.

(4)  The investment:

(a)  must be lawful; and

(b)  must not form the basis for security or collateral for a loan.

That funds must be ‘lawfully acquired’ requires the applicant show a pedigree of how the funds were earned or accumulated. This is discussed in more detail later but it is about going back far enough in the accumulation process to show the funds are genuine. Gaining a leverage through tax avoidance does not mean the funds were ‘lawfully acquired’.

The funds themselves have to be ‘unencumbered’ in the sense that some charge or debenture exists over the money or that the money is pledged to some other person or body. It does not mean that borrowed funds are prohibited as long as the money itself is not subject to some encumbrance. Traditionally in Australia small to medium size businesses raise money by mortgaging real property, often starting with the family home. Money obtained in that fashion would be unencumbered even though the asset used to obtain the money is encumbered by a mortgage.

Once the investment is made it cannot be used as a security of collateral for a loan. Early in the SIV process some financial institutions were offering a loan back to the investor.

It is the legislative instrument Migration (IMMI 15/100: Complying Investments) Instrument 2015 (commencing 1 July 2015) which defines the essence of what is complying significant investment  as set in Reg 5.19C(5) & (6) which read :

(5)  The investment, and the means by which the investment is made:

(a)  must be of a kind permitted by the requirements specified in an instrument under subregulation (6); and

(b)  must comply with any requirements specified in an instrument under subregulation (6).

(6)  The Minister may, by legislative instrument, specify requirements for the purposes of subregulation (5).

So, as can be seen the Minister can easily amend the requirements for a complying significant investment  by just creating a new instrument.

Here is the essential requirement :

6  Value of required investments

(1)  The investment must include:

(a)  a total of at least AUD 500 000 invested, or to be invested, in one or more venture capital funds under section 8; and

(b)  a total of at least AUD 1 500 000 in emerging companies investments (see section 9).

(2)  Any remaining portion of the investment may be invested in one or more balancing investments (see section 10).

A ‘venture capital fund’ is defined in the dictionary to the legislative instrument as follows :

venture capital fund means any of the following bodies:

(a)  a venture capital limited partnership conditionally registered, or unconditionally registered, under the Venture Capital Act 2002;

(b)  an early stage venture capital limited partnership conditionally registered, or unconditionally registered, under that Act;

(c)  an Australian venture capital fund of funds conditionally registered, or unconditionally registered, under that Act.

In very broad terms this Venture Capital Act sets up a regime for the federal government through Innovation Australia, an independent statutory body established under the IR&D Act  to register Venture Capital Limited Partnerships (VCLP). They must have committed capital of at least $10 million.  The business cannot have property development, land ownership, finance or construction as its primary activity.  These VCLP are for a business seeking venture capital or an investor seeking access to a portfolio of Australian growth companies.  There is a host of tax benefits associated with any gains made out of the VCLP but there is no tax deduction for the actual investment.

The requirements for SIV  purposes are set out in subparagraph 8 as follows :

8  Venture capital fund investments

General

(1)  Investments by the investor in a venture capital fund or funds must comply with the requirements of this section.

Initial investment requirements

(2)  Between the time of application for the investor’s visa, and the time that is 12 months after the visa is granted to the investor:

(a)  the investor must enter into an agreement with the general partner of each of one or more venture capital funds committing the investor to make an investment in one or more venture capital funds of at least AUD 500 000 in total; and

(b)  the amount of each investment in a venture capital fund must be held:

(i)  in escrow in favour of the general partner of the fund; or

(ii)  as security for a guarantee issued by an Australian ADI in favour of the general partner of the fund.

(3)  At the time of decision for the investor’s visa, at least AUD 500 000 in total must be held either:

(a)  as mentioned in paragraph (2)(b); or

(b)  on deposit in either or both of the following for investment in accordance with this section:

(i)  a cash management trust or trusts (within the meaning of the Income Tax Assessment Act 1997);

(ii)  an Australian ADI. [Australian Deposit Taking Institution]

Investment requirements while visa is in effect

(4)  A substantial part of the total of amounts held under paragraph (2)(b) for investment by one or more venture capital funds (not including any fees related to the investment) must be invested during the period the visa is in effect.

Investment realised

(5)  If an investment in a venture capital fund is realised before the visa ceases to have effect, the amount realised from the investment must be reinvested in one or more of the following:

(a)  one or more venture capital funds (which may include the same fund);

(b)  emerging companies investments (see section 9);

(c)  balancing investments (see section 10).

Investment reimbursed following lapse of conditional registration

(6)  If an investment in a venture capital fund (the original venture capital fund) is reimbursed (in whole or in part) in the circumstances covered by subsection (7) before the visa ceases to have effect, the amount reimbursed must be reinvested in another venture capital fund or funds.

(7)  The circumstances covered by this subsection are as follows:

(a)  the original venture capital fund was conditionally registered under section 13‑5 of the Venture Capital Act 2002;

(b)  the fund’s conditional registration has lapsed under subsection 13‑10(3) of that Act;

(c)  the investor’s investment in the original venture capital fund is reimbursed (in whole or in part) because of that lapse.

Note:   See subregulations 5.19C(7) and (8) of the Regulations for the allowable period during which funds may be transferred from one investment to another.

The $1.5 million ‘emerging companies investment’

So the requirement for investing $1.5 million in ‘emerging companies investments’  is as follows although as always let’s look at some definitions first.

managed investment fund means any of the following (whether open or close ended):

(a)  a managed investment scheme based only on interests:

(i)  that are not able to be traded on a financial market (within the meaning of section 767A of the Corporations Act 2001); and

(ii)  for which no representation has been made to any member, or prospective member, of the managed investment scheme that the interests will be able to be traded on such a financial market;

(b)  a listed investment company;

(c)  a financial product mentioned in paragraph 764A(1)(d), (e) or (f) of the Corporations Act 2001 that may result in a payment from an approved benefit fund (within the meaning of the Life Insurance Act 1995), or a statutory fund maintained under the Life Insurance Act 1995.

A typical example of a ‘managed investment scheme’ is a cash management trust but can include property trusts and share trusts all registered as such under ASIC (the Australian Securities & Investment Commission). The item mentioned in subparagraph (c) is a type of insurance bond.

A listed investment company is a company that invests in shares and different to a cash management fund in that in the former one buys shares (ie Australian ASX based shares or international shares). A big advantage of the listed investment company is that investors cannot withdraw the money, they sell shares in that company.

9  Emerging companies investments

(1)  An emerging companies investment is an investment in accordance with this section.

(2)  The investment must:

(a)  be invested through one or more managed investment funds; and

(b)  comply with the requirements of this section at any time.

Let’s look at some terms here. A managed investment fund

Permitted investments

(3)  The investment may be made only in one or more of the following:

(a)  securities quoted on ASX Limited;

(b)  securities (Australian non‑ASX quoted securities) quoted on an Australian securities exchange other than ASX Limited;

(c)  securities (unquoted Australian securities) not quoted on an Australian securities exchange that are covered by subsection (4) (but see section 11 for investments in Australian residential real estate);

(d)  securities (foreign quoted securities) quoted on a securities exchange operated in a foreign country;

(e)  cash held by Australian ADIs, including certificates of deposit, bank bills and other cash‑like instruments (but see section 11); [limited to 20% see subparagraph 11(10)]

(f)  derivatives (but see section 11).

(4)  For paragraph (3)(c), unquoted Australian securities are covered by this subsection if:

(a)  they are issued by:

(i)  a company incorporated in Australia; or

(ii)  a trustee or responsible entity of a managed investment scheme that invests in Australian real property or Australian infrastructure assets; and

(b)  the central management and control of the company or managed investment scheme mentioned in paragraph (a) is in Australia.

(5)  The investment must not be made in:

(a)  securities issued or proposed to be issued by a government; or

(b)  debentures.

Market capitalisation

(6)  For an investment in securities of a company or managed investment scheme:

(a)  at the time of the first investment in those securities, the company or the managed investment scheme must have a market capitalisation of less than AUD 500 000 000; and

(b)  at any time, the proportion of the value of the managed investment fund’s net assets held in securities of companies and managed investment schemes whose market capitalisation has grown to AUD 500 000 000 or more (since their securities were first invested in) must not exceed 30%.

Australian non‑ASX quoted securities

(7)  The total value of investments in Australian non‑ASX quoted securities must comprise no more than 20% of the value of the managed investment fund’s net assets at any time.

Unquoted Australian securities

(8)  An investment in unquoted Australian securities must result in no more than 20% of the value of the managed investment fund’s net assets being held in such securities immediately after the time of investment.

Foreign quoted securities

(9)  The total value of investments in foreign quoted securities must comprise no more than 10% of the value of the managed investment fund’s net assets at any time.

Investments issued by 20 different issuers

(10)  The investment must be maintained in securities issued by 20 or more different issuers from a time that is 3 months after the first investment is made by the managed investment fund.

Percentage of investments issued by a particular issuer

(11)  An investment in securities issued by a particular issuer must result in no more than 10% of the value of the managed investment fund’s net assets being held immediately after the time of investment in securities issued by that issuer.

The purpose of all of the above is to ensure that the ‘fund’ is not controlled by the SIV investor.

Then we move over to the balancing investment, ie the remaining $3 million which must be invested :

10  Balancing investments

General

(1)  A balancing investment is an investment of an investor’s funds in accordance with this section.

(2)  The investment must:

(a)  be invested through one or more managed investment funds; and

(b)  comply with the requirements of this section at any time.

Permitted investments

(3)  The investment may be made only in one or more of the following:

(a)  securities of any of the following bodies, if the body is quoted on an Australian securities exchange:

(i)  a company;

(ii)  a real estate investment trust;

(iii)  an infrastructure trust;

(b)  bonds or notes issued by:

(i)  a company that is quoted on an Australian securities exchange; or

(ii)  a wholly‑owned subsidiary of a company mentioned in subparagraph (i), if the subsidiary is incorporated in Australia; or

(iii)  a company incorporated in Australia, or a registered foreign company, if the bonds or notes are rated as investment grade by a credit rating agency that holds an Australian financial services licence;

(c)  annuities issued by a company registered under section 21 of the Life Insurance Act 1995, if the annuity does not repay capital during the period the visa is in effect;

(d)  Australian real property (but see section 11); [see 11(7)(a) – no direct residential real property investment may be made]

(e)  cash held by Australian ADIs, including certificates of deposit, bank bills and other cash‑like instruments (but see section 11);

(f)  derivatives (but see section 11).

11   General requirements

General

(1)  The requirements under this section apply in relation to an investment made through a venture capital fund or a managed investment fund.

Australian financial services licence requirements

(2)  A person covered by subsection (3) in relation to the investment must:

(a)  hold, or be otherwise covered by, an Australian financial services licence; or

(b)  be exempt from any provision of the Corporations Act 2001 requiring an Australian financial services licence to be held in relation to the investment.

(3)  The following persons are covered by this subsection in relation to the investment:

(a)  a person issuing the interests in the venture capital fund or the managed investment fund (the issuer), including the following (without limitation):

(i)  the general partner of a venture capital fund;

(ii)  a trustee or the responsible entity of a managed investment scheme;

(iii)  the issuer of shares in a listed investment company;

(iv)  for an investment mentioned in paragraph (c) of the definition of managed investment fund in section 4 — the insurer;

(b)  a person authorised by the issuer to manage the investment, or to make the investment, on the issuer’s behalf.

(4)  The central management and control of a person (other than an individual) mentioned in subsection (3) must be in Australia.

(5)  The investor and (if applicable) the investor’s spouse or de facto partner, and any associate (within the meaning of the Corporations Act 2001) of the investor, spouse or de facto partner, must not:

(a)  be a person mentioned in subsection (3); or

(b)  be involved in the management or control of, or in partnership with, a person mentioned in subsection (3).

Funds under management in Australia

(6)  The following persons in relation to an investment must maintain a minimum of AUD 100 000 000 in funds that are under management in Australia:

(a)  if the investment is made through a managed investment scheme — a trustee, or the responsible entity, for the scheme;

(b)            if the investment is made through a listed investment company — the issuer of shares in that company, or the person authorised by the issuer to manage the investment, or to make the investment, on the issuer’s behalf;

(c)  if the investment is made in a financial product mentioned in paragraph (c) of the definition of managed investment fund in section 4 (which deals with life insurance products) — the issuer of that product;

(d)  if the investment is made through a fund of funds or an investor directed portfolio service — the issuer of the fund of funds or the person responsible for operating the investor directed portfolio service.

Australian residential real property

(7)  The following requirements apply to investment by a managed investment fund in Australian residential real property, including any Australian land zoned for residential use (a residential real property investment):

(a)  no direct residential real property investment may be made through the fund;

(b)  no other residential real property investment (including, but not limited to, a debt or equity instrument, or a derivative) may be made through the fund unless:

(i)  the value of all residential real property investments is no more than 10% of the value of the fund’s net assets; and

(ii)  the investment is not made for the dominant purpose of deriving financial benefits; and

(iii)  the investment is not made for the dominant purpose covered by subsection (8).

(8)  For the purposes of subparagraph (7)(b)(iii), this subsection covers the dominant purpose of assisting any of the following individuals to reside in or gain legal ownership in Australian residential real property (including any Australian land zoned for residential use):

(a)  the investor;

(b)  the investor’s spouse or de facto partner;

(c)  any other member of the family unit of the investor or the investor’s spouse or de facto partner.

Derivatives

(9)  An investment may be made in a derivative, other than an option mentioned in paragraph (e) of the definition of securities in section 4, only if:

(a)  the investment is made for risk management purposes; and

(b)  the investment is not a speculative investment.

Managed investment fund investments — cash in Australian ADIs

(10)  No more than 20% of a managed investment fund’s net assets may be invested in cash held by Australian ADIs (including certificates of deposit, bank bills and other cash‑like instruments).

Managed investment fund investments — fund of funds or investor directed portfolio services

(11)  An investment in a managed investment fund may be:

(a)  made through a fund of funds or an investor directed portfolio service, if the investment is otherwise in accordance with the requirements of this Part; and

(b)  held in cash in the fund of funds, or investor directed portfolio service:

(i)  for a period of up to 30 days after the time the funds are first made available for investment; and

(ii)  during any switching period mentioned in subregulation 5.19C(7) of the Regulations.

There is an allowable period of non-compliance – see :

12  Allowable non‑compliance period

Despite any other provision of this Part, if an investment would (apart from this section) breach of any of subsections 9(6) to (11) (which deal with emerging companies investments) or subsection 11(10) (which deals with cash holdings in managed investment funds), the investment is taken not to breach the requirement during the period starting on the first day of the breach and ending at the earlier of:

(a)  the day the breach is remedied; and

(b)  the day that is 10 business days after the first day of the breach.

Having all of this in order is the pathway to permanent residence for the purpose of subclass 888 visa.

Barbara DavidsonNew PIV