Fund managers and others should take note of restrictive changes and developments flagged by the Australian government in relation to the Significant Investor Visa (SIV) and the Premium Investor Visa (PIV) schemes. The changes to the complying investment policy for SIV and the new PIV are to take effect from 1 July 2015.
In terms of transitional arrangements, pending the review of the actual regulations, Austrade has signalled that the new framework will apply to visa applications received from 1 July 2015. Only funds that comply with the new framework will constitute complying investments for new visa applicants from 1 July 2015 under the SIV and PIV schemes. At this stage pending review of the actual regulations, according to Austrade, existing visa applicants whose applications have already been received and who have already invested will fall under the old framework.
According to the government’s release on 12 February 2015:
- the proposed complying investment framework for the SIV scheme:
- no longer includes government bonds;
- specifying that at least 20 per cent ($1m) of the applicant’s $5m investment must flow into early stage, growth capital investments, through approved venture capital funds;
- specifying that at least 30 per cent ($1.5m) of the applicant’s investment must flow into emerging listed companies, through managed funds investing in small ASX listed companies; and
- reinforcing the existing rules banning direct investment into residential real estate, and introducing new measures to clamp down on indirect investment into residential real estate. A portion of funds will continue to be permitted to flow into commercial real estate, via managed funds; and
- the PIV scheme will be more flexible in terms of investment class.
A one-page draft document put out by Austrade (for further consultation requesting feedback by 3 March 2015)(Austrade Draft Document) contains some more details of the proposals. According to the Austrade Draft Document, among other things, for complying investments for the SIV and PIV schemes:
- direct investment into residential real estate is ineligible and indirect exposure through investment vehicles (ie managed funds) is to be restricted to less than 10% of the vehicle’s net assets;
- “loan back” arrangements where the SIV investment is used as collateral by applicants are excluded;
- derivatives are to be used for risk management purposes only and combined cash and derivatives are to be limited to 20% notional exposure of a fund’s net assets; and
- investments through AFSL products are to be with managers independent of the applicant and their spouse.
The Austrade Draft Document also includes further details on the requirements/ criteria for the SIV scheme in relation to venture capital funds and small Australian stock exchange listed companies.
Finally, the Austrade Document includes information as to the requirements/ criteria for the SIV scheme for the balance of the investments (other than venture capital funds and small Australian stock exchange listed companies).
A copy of the government release can be found at http://www.trademinister.gov.au/releases/Pages/2015/ar_mr_150212.aspx
Information and a copy of the document from Austrade can be found at http://www.austrade.gov.au/invest/significant-investor-visa-and-premium-investor-visa-programmes
Austrade has emphasised that the Austrade Draft Document is not set in stone, pending further consultation and finalisation, and that there are as yet no draft regulations.
Sophie is the director of both Sophie Grace Legal Pty Ltd and Sophie Grace Pty Ltd. Sophie has worked with some of Australia’s largest financial services organisations in compliance, legal and operational roles. She has also worked with small businesses to provide tailored solutions with a strong understanding of business practicalities as well as obligations to regulators.