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Red carpet, golden opportunities


Bill Fuggle SmallSam Appleton smallThe Significant Investor Visa program, announced by the federal government last year, may prove to be a windfall for the financial planning industry

Bill Fuggle SmallSam Appleton smallThe Significant Investor Visa program, announced by the federal government last year, may prove to be a windfall for the financial planning industry

On May 3, the Minister for Immigration and Citizenship, Brendan O’Connor, announced the grant of Australia’s first Significant Investor Visa (SIV). The SIV program was introduced by the federal government in late 2012.

It offers a new pathway for migrants who invest more than $5 million in certain Australian sectors and opens the door to opportunities for Australian financial advisers who can get close to these migrant investors.


What is the Significant Investor Visa?

The SIV is a new stream within the Business Innovation and Investment Program. It consists of two visas:
•    the Business Innovation and Investment (Provisional) (subclass 188) visa – a temporary residency visa
•    the permanent residency subclass 888 visa

The purpose of this new visa is to provide a boost to the Australian economy by creating a new source of funding and to compete effectively for high net worth individuals seeking investment migration.

Who can apply for the SIV?

Applicants with a successful business and/or investment career may be eligible for a temporary visa by investing $5 million into complying investments for a continuous period of four years from the date of the grant of the visa.

The advantages of the SIV for migrants

For migrants, the Significant Investor Visa has a number of advantages over other types of visa. Migrants do not need to satisfy any business innovation test and there are no upper age limits. There is also no English language threshold requirement for SIV applicants.

The temporary visa may be extended for a further four years so long as the migrant investor continues to hold a minimum of $5 million in complying investments.

What are ‘complying investments’?

SIV complying investments are:
•    Commonwealth, state or Territory government bonds;
•    Australian Securities and Investments Commission (ASIC)-regulated managed funds with a mandate for investing in Australia (this includes wholesale unregistered schemes); and
•    direct investment into Australian proprietary companies.
For an ASIC-regulated managed fund to qualify as a complying investment, it must only hold assets specified by the immigration minister in a legislative instrument in writing. These categories include:
•    infrastructure projects in Australia;
•    cash held by Australian authorised deposit-taking institutions;
•    bonds issued by the Commonwealth government or a state or Territory government;
•    bonds, equity, hybrids or other corporate debt in companies and trusts listed on an Australian stock exchange (this includes shares in ASX-listed entities);
•    bonds or term deposits issued by Australian financial institutions;
•    real estate in Australia; and
•    Australian agribusines

Sponsorship by a state

Each successful applicant will need to be sponsored by an Australian state or Territory.

New South Wales has indicated that in order for it to sponsor an applicant the applicant must invest 30 per cent of the $5 million (that is, $1.5 million) in NSW State Bonds (known as ‘Waratah bonds’).

The other states have all indicated they will consider applicants more on a ‘case by case’ basis, with varying requirements covering the type of underlying assets, including state-issued bonds or investment in companies operating in the relevant state.

All states require some demonstration of a benefit to the respective state.

The Territories have not yet given any indication of their sponsorship criteria.

As well as the $5 million investment, most states require applicants to have an additional amount (varying from $50,000 to $200,000) immediately available for settlement-related expenses.

The importance of the Significant Investor Visa for financial planners
The SIV provides an investment pipeline that will enable Australian businesses to benefit from the immense wealth that has accumulated in Asia in recent decades. Of the 400-odd applications in the immigration department’s system, approximately 90 per cent are from China.

The opportunity

The SIV presents an opportunity for financial planners who can “get close” to migrant investors. If migrant investors have $5 million to invest for SIV purposes, they are likely to have other assets for which they will require advice and planning services.

The structure of the SIV program allows migrants to test the waters under the temporary visa before deciding to settle in Australia permanently. We consider the need for financial planning services will be greatest at the point during the initial four-year temporary visa period (or eight years if it is rolled over) when the migrant investor decides to settle in Australia permanently.

Getting close to migrant investors

To gain access to migrant investors, we have observed Australian financial planners and private client divisions teaming up with other entities that have strong connections with Chinese clients.

Various joint ventures and partnerships, involving migration agents in varying degrees, with Australian branches of Chinese banks and other Chinese business groups have been formed in the wake of the SIV program announcement. This trend makes sense and we consider it will continue.

Having Chinese speakers in-house will also be of benefit for planning firms given that the SIV does not require the migrant to have any English language skills.

SIV investors will not be retail clients and therefore the Future of Financial Advice reforms, considerations and related matters will not be relevant.

Complying investments

Financial advisers should be aware of what constitutes a complying investment for SIV purposes if they are to properly advise migrant investors. A raft of managed funds has been specifically established to accommodate SIV investment over the past 6 months.

Many existing managed funds do not meet the SIV’s strict asset requirements. An example of this would be an Australian equities fund that holds derivatives to hedge an overweight position or equities cash. Derivatives are not a complying investment and therefore the fund would be non-compliant for SIV purposes.

What next?

Planners should consider the SIV opportunity and how they may benefit from it. While the sheer size of funds involved makes SIV migrants an attractive target and client base, sourcing SIV clients may prove difficult if existing distribution channels have few Chinese relationships.

About Bill Fuggle and Sam Appleton
Bill Fuggle MediumSam Appleton Medium

Bill Fuggle is a partner and Sam Appleton is a senior associatie in Baker & McKenzie's Sydney financial services practice group.

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