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Significant Investor’s pathway to residency

 

December 2015

 

 

 

In the three years since it was introduced, Australia’s significant investor visa program has attracted more than a thousand applicants, mostly from mainland China, who want a faster road to Australian citizenship.

Chinese applicants are drawn to the Australian economy’s comparative safety and stability, the lifestyle, quality education and its closeness to Asia. A spokesperson for the Department of Immigration and Border Protection said as of November 3, 2015, that 1108 people had applied for the visa in 2015.

The significant investor visa has a number of benefits over regular visa pathways, but requires a $5 million investment in Australia, which can be removed after four years. There are several financial institutions in Australia that provide investment guidance for visa applicants.

“We can provide advice, educate and create an investment proposition for applicants at a risk level appropriate for them,” ANZ Private Head of Asian segment Grace Bacon says.

Before they apply, potential applicants need a thorough understanding of what the visa program involves so they can carefully weigh its benefits and requirements. Less than half of applicants successfully obtain the visa because they don’t meet visa criteria or can’t satisfy queries from the Australian government.

 

Significant investment

The reason applicants’ finances are so thoroughly investigated is because Australia wants to know the source of the funds to be invested.

The Department of Immigration can ask for a lot of personal information in this process, which some applicants have been unwilling to provide.

Applicants should also consider that beginning July 2015, they must invest a minimum $2 million in riskier small cap and venture capital funds in Australia. The remaining $3 million can be more widely invested.

Bacon says “a lot of Chinese investors are concerned about the recent downturn in the Chinese market and they’re looking for alternative bases to diversify their assets, and many see Australia as a comparative safe haven”.

The SIV program offers a four-year pathway to permanent residency requiring applicants only spend 160 days in Australia during this period: much less than the two years mandated in other visa classes.

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Do you meet the requirements?

The visa requirements recently changed and now require a minimum of $500,000 to be invested in venture capital funds that are registered under Australia’s Early Stage Venture Capital Limited Partnership or Venture Capital Limited Partnership programs. This is expected to increase to $1 million after two years. Additionally, a minimum of $1.5 million must be invested in small or micro-cap funds or listed investment companies.

After these investments are made, the balance – up to $3 million – can be invested in a range of managed investment funds or equities, property securities, cash or fixed-income investments. The trustee or responsible entity for these investments needs to be unrelated to the investor, the investor’s spouse or de facto partner to ensure funds are managed at arm’s length.

Most major Australian banks, such as ANZ, and larger investment banks have investment “solutions” for SIV applicants that meet all the Australian government’s requirements.

 

The journey

So what does applying involve? First, the applicant needs to decide which of Australia’s states or territories he or she wants to live in and seek sponsorship by that state or territory.

Next, they must lodge an expression of interest with the Australian government. If the state or territory agrees to sponsor the applicant it is automatically logged online, generating an invitation to apply. There is then a 60-day window to lodge an application and a further 28 days for the applicant to provide supporting documents.

Tony Le Nevez, managing director of immigration agency Hamilton Watts says the application typically takes six to nine months, with government officers sometimes coming back to the applicant with questions or seeking further documentation.

If successful, the department gives the green light for applicants to invest the $5 million and provide evidence where it has gone. The applicant and all family members are then awarded a four-year temporary visa. They can enter and leave Australia at will, they can work, their children can study there, and they can buy property under the relevant Foreign Investment Review Board rules.

At the end of the period, as long as the applicant spends enough time in Australia and the initial investment stays in place, permanent residency is awarded and the investment funds can be removed. Investment restrictions are lifted, meaning residents can freely buy property.

"The significant investor visa has a number of benefits over regular visa pathways, but requires a $5million investment in Australia…"

Be prepared to share details

The process may sound straightforward, but Le Nevez says it can be difficult to satisfy Australian authorities’ queries about source of the $5 million to be invested. As the funds come from outside the Australian financial system, the Australian government may need to ask extensive questions to understand where applicants get their money from.

“So typically, if people say ‘I’ve got real estate in China that’s worth $10 million dollars’, they will ask you to provide evidence you own that, and know how it was you came to acquire it,” says Le Nevez.

He recommends applicants engage an agent in Australia who is licensed and can explain up-front everything that’s involved. Applicants can go to a range of sources for assistance, such as law firms like Hamilton Watts or institutions such as ANZ Private.

“You have to establish a level of trust with the person handling your application because this can be a very intrusive visa application,” Le Nevez says.

The Australian government requires substantial information about people intending to migrate to Australia and, as such, applicants must be prepared to share a lot of intimate personal details such as complex family structures, their asset base, business dealings, surrogate children and second families.

 

Got the stomach for risk?

The appetite for the new SIV appears to have fallen since the changes made in July. Between July and November 3 this year there were only 19 applications, according to the Department of Immigration.

“That’s an indication the new policy settings are not all that attractive to potential investors,” Le Nevez says.

But a spokesperson for the Australian Trade Commission says the government expected an initial drop-off in applications and “the bar was set too low in the previous program”.

“SIV investment was mostly going into passive investments like government bonds and into residential real estate schemes – areas that already attract large capital flows,” the spokesperson says.

“The government believes Australian permanent residency warrants more dynamic investment in areas of the economy where it can make a real difference.”

There are a range of organisations that offer services to SIV applicants. Some, such as specialist investment managers, offer SIV-specific portfolios that are more liquid than typical venture capital investments, with the option of funds being redeemed after four years.

ANZ Private, through its Asian segment team and using its wider Asian franchise network, is one of a number of institutions offering a banking and wealth service for applicants looking to settle in Australia.

In addition to assisting with investment options, ANZ Private can assist with information relating to the many considerations that come with migration to a new country.

As with many service providers in this area, ANZ’s team has a diverse Asian-language base and also has an in-depth understanding of cultural needs of these new migrant clients.

 

Ben Hurley, ANZ Contributing Author

 

To discuss what this insight could mean for you, talk to your ANZ Private Banker directly, or contact us below.

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