Significant and Premium Investor Visa Programs

Review of Australia’s business, investment and talent visas: SIV complying investment framework consultation questions

The Department of Immigration and Border Protection (DIBP) is conducting a review of Australia’s business, investment and talent visas. The review will assess whether these visa programmes enable Australia to target and attract the best business migrants, entrepreneurs, investors and distinguished talents. The review includes consideration of the Significant Investor Visa (SIV) and Premium Investor Visa (PIV).

Further information on the review, including a list of public consultation questions and instructions on how to make a submission, is available on the DIBP website. For enquiries about the review generally, or to make a submission on the broader visa framework for Australia’s business, investment and talent visas, please contact DIBP at ICAP@border.gov.au.

While DIBP is leading the review as a whole, Austrade is responsible for the policy settings of the SIV and PIV complying investment framework (CIF) and will lead this aspect of the review. The review will not consider changes to the SIV complying investment settings as set out in the CIF one-page summary (PDF), with the exception of the quantum of the venture capital and growth private equity (VCPE) investment requirement and a small number of technical matters. This is because the enhanced CIF is working well and industry has devoted substantial resources to developing new products that comply with the enhanced rules. When the new CIF was introduced in July 2015, the Government announced it expected to increase the VCPE component to $1 million for new SIV applications within two years as the market responded.

In this context, Austrade is seeking responses to the following specific questions. Comments should be sent to investorvisas@austrade.gov.au no later than COB 31 July 2017.

  1. Should the VCPE component of the SIV CIF be increased from $500,000 to $1 million? Why or why not?
    1. What would be the likely impact on demand for the SIV if the VCPE component were increased?
    2. Is there sufficient absorptive capacity in the Australian venture capital market to manage this increase?
    3. If the VCPE component increases to $1 million, should the emerging companies or balancing investment components reduce by $500,000 to compensate? Why or why not?

  2. Austrade is also seeking views on better aligning some specific SIV technical settings in the Legislative Instrument (‘the Instrument’) to the intent as set out in the CIF one-page summary (PDF). Specifically, Austrade invites comments on the following technical matters:
    1. Emerging companies as ultimate investees: The SIV emerging companies component is intended to benefit small and emerging Australian companies. To provide further assurance that the ultimate beneficiaries of this component are small rather than large capitalised companies, Austrade invites views on whether the Instrument should specify the emerging companies investment must not be made in securities that otherwise meet the requirements for this component but where the issuer of those securities invests the proceeds of the issue of those securities in securities that do not meet the market capitalisation requirements for the emerging companies component. For example, this would mean small exchange traded funds which invest in the securities of large capitalised companies would not be compliant with the requirements of the emerging companies investment component.
    2. Derivatives and risk management: The SIV framework provides complying investments may be made in derivatives only if the investment is made for risk management purposes and is not a speculative investment. Paragraph 7 of the Explanatory Statement to the Instrument notes that complying investments should not be “used speculatively or for hedging market exposure”. Austrade invites views on whether, to provide greater clarity on the scope of risk management purposes for the purposes of the SIV, the Instrument should specify: that complying investments may only be made in a derivative if the investment is not designed to substantially reduce or completely eliminate the exposure of an investor to the risk of loss from changes in the market price of an investment; and that hedging of currency and interest rate risks is permitted, however capital guarantee products should no longer be considered complying.
    3. Cash holdings in a fund of funds: The SIV framework requires no more than 20% of a managed investment fund’s net assets be invested in cash held by Australian ADIs. However, it may be unclear how this requirement applies in a fund of funds structure. Austrade seeks views on whether the Instrument should specify that complying investments may not result in more than 20% of an investor’s emerging companies or balancing investments being invested in cash held by Australian ADIs; and that investors need to have regard to the balance sheets of the companies in which their emerging companies or balancing investments are ultimately made when determining their cash holdings.
    4. Complex fund of funds and IDPS structures: The SIV framework permits the use of funds of funds and investor directed portfolio services (IDPS). However, there is currently no limit on the complexity or number of levels a fund of funds or IDPS structure may have, which can make it difficult to assess the compliance of the structure. Austrade seeks views on whether the Instrument should specify: a fund of funds or IDPS may invest directly in complying investments, or indirectly through another fund or entity that invests in complying investments, but that fund or entity may not invest through another fund or entity.

Please contact investorvisas@austrade.gov.au with queries about these consultation questions.



Disclaimer

This is for information only and is not advice. Any person relying on this information does so entirely at their own risk and Austrade urges any user to seek professional advice before making any decision. Austrade denies liability for any loss arising from reliance on information provided on this website.