SIV and PIV start golden opportunity anew from July 1, 2015

The Australian Government has implemented changes today to the complying investment framework for the popular Significant Investor Visa (SIV) program in order to direct investment away passive investment towards investment in innovation and industrial development.

The changes to the investment framework commencing from 1 July 2015 will require a visa applicant to invest at least $5 million over four years in select investments.

Investment in residential real estate will only be permitted to comprise 10% of the $5 million minimum investment amount, although investors may invest in excess of this outside of this limit.

A new class of investment visa, the Premium Investment Visa (PIV) program has also been introduced on 1 July 2015.

Unlike SIV which requires investor to invest $5 million into complying investments for a minimum of four years before being eligible to apply for a permanent visa, PIV offers a more expeditious, 12 month pathway to permanent residency.

It is established to attract talented entrepreneurs and innovators and access to the program will be by invitation of the Australian Government.

An applicant under the PIV will be required to invest a minimum of $15,000,000 in managed funds or direct investment in ASX listed assets, government or semi-government bonds or notes, corporate bonds or notes, proprietary limited companies, real property in Australia (excluding residential property), annuities or government approved philanthropic donations. 

Solicitor Michael Sing at Rostron Carlyle says the PIV represents an "outstanding opportunity for successful entrepreneurs to invest and secure permanent residency in 12 months, without having to live here, regardless of age and English language ability."

The Government announced that the scope of eligible investments must be an Australian managed fund(s) or direct investment in:

• Australian securities exchange-listed assets.
• Australian government or semi-government bonds or notes.
• Corporate bonds or notes issued by an Australian exchange-listed entity (or wholly owned subsidiary of the Australian listed entity) or investment grade rated Australian corporate bonds or notes rated by an AFS licensed debt rating agency.
• Australian proprietary limited companies.
• Real property in Australia excluding residential property.
• Deferred annuities issued by Australian registered life companies.
• State & Territory government approved philanthropic donation.

The investment may be made into one or more of these categories at any time in the qualifying period of 12 months.

Direct Investment in Commercial Property 

Because non-residential property is a qualifying investment category, the purchase of commercial property such as a shopping centre or industrial development over $15 million will allow an application for the PIV as a direct investment.

Foreign Investment Review Board (FIRB) approval is usually able to be obtained for any commercial property up to $54 million in any event, he said.

Cash is to be no more than 20% of a fund’s net assets and derivatives are to be used for risk management purposes only.

Direct investment into residential real estate is excluded and indirect exposure through investment vehicles is to be restricted to less than 10% of a vehicle’s net assets. Investors can of course invest in residential real estate, subject to FIRB rules, but this investment will not be assessed for PIV purposes.

Loan back’ arrangements, where the investment is used as collateral by the applicant, are excluded.

The PIV applicants will be eligible for Permanent Residency after only 12 months of maintaining their investment.

"At this stage, there are no minimum residency requirements to be complied with under the PIV: the applicant does not have to live in Australia at all for the 12-month period.

"This is a new visa, and the process for this is still being developed," he said.

"This is a new opportunity specifically for entrepreneurial investors to secure a visa as a bonus to investing in Australia.

"For Australian developers, it’s also an opportunity to offer another benefit or sales feature to prospective investors or joint venture partners seeking to acquire sites or equity participation."

Legitimate source of investment funds is still required to be proved. 

Michael Sing noted that the third party penalties for assisting in breaching FIRB laws make it important for agents and brokers to also be aware of the new rules.