Australia: Launch of Australia's Significant Investor Visa: A world of opportunity for managed funds

Corporate Update (Australia)
Last Updated: 28 November 2012
Article by Warwick Painter, Les Koltai, Susheela Rivers and Jacqueline McStay


In May 2012, the Federal Government announced that it would introduce a new stream of visa referred to as the 'Significant Investor Visa', which would provide high net worth individuals with the ability to apply for an Australian visa and ultimately permanent residence on the basis of a minimum investment in Australia of $5 million. Applicants would not be required to satisfy the innovation points test, which would otherwise apply under a business investment/skilled migration application. There would also be no upper age limit for applying, providing a golden opportunity for high net worth individuals wishing to migrate to and invest in Australia.

In August this year, the Department of Immigration and Citizenship announced more detail about how the Significant Investor Visa would operate and, in particular, the conditions that would apply to a 'complying investment'. The new stream of visa officially commenced on 24 November 2012 with the enactment of the Migration Amendment Regulation 2012 (No.7) (Regulations). The issue of the Regulations has finally allowed fund managers to have detailed information about the type of managed fund into which investments can be directed in order to qualify for the new visa.

The Significant Investor Visa is a new stream within the Business Innovation and Investment (Provisional) (Subclass 188) visa and the Business Innovation and Investment (Permanent) (Subclass 888) visa. Considerable interest in the new visa is reported to have been shown by high net worth individuals across Asia (and in particular China). It is expected that, with the release of the Regulations, there will be significant opportunities for operators of managed funds investing in complying assets to take advantage of this interest by tailoring both existing and new products to receive the investments that will follow. With a reported expectation of up to 700 applicants annually, this represents a significant pool of investment funds that will need to be managed appropriately and within the conditions provided under the Regulations.

Additional flexibility for managed funds

Of particular interest to local fund managers will be a clarification and broadening of the conditions originally announced in August 2012, so that a complying investment can be made into a managed fund where one or more of the following apply:

  • The fund is an unregistered managed investment scheme, provided the trustee of the fund holds an Australian Financial Services Licence (AFSL)
  • The investment in the fund is made indirectly through an 'investor directed portfolio service'
  • The fund is offered only to a limited number of high net worth investors and is not 'open to the general public'.

When the conditions were announced in August, they included a requirement for the managed fund to be 'regulated by the Australian Securities and Investments Commission (ASIC)' and to be 'open to the general public'. This implied the need for a managed fund to be a registered managed investment scheme and offered to retail investors alongside high net worth investors. The conditions also appeared to require that the investment into the fund be made directly or through a family company or a controlled family trust of the high net worth investor.

The Regulations now make it clear that, in order to be a complying investment, a managed fund simply needs to be a 'managed investment scheme' as defined under the Corporations Act 2001 (Cth) (Corporations Act), where the operator that issues the interests in the fund to investors, does so under an AFSL and that this is considered to satisfy the requirement for the fund to be regulated by ASIC. There is no requirement in the Regulations for the fund to be offered to the general public and indirect investments in the fund through an investor directed portfolio service are specifically allowed.

How can the Significant Investor Visa be obtained?

In order to apply for the Significant Investor Visa, applicants must:

  • Submit an expression of interest in SkillSelect (an online service that enables skilled workers and business people interested in migrating to Australia to record their details to be considered for a skilled visa)
  • Be nominated by a state or territory government
  • Make investments of at least $5 million into 'complying investments' for a minimum of four years.

The NSW Government has announced that in order to be nominated by the NSW Government, visa applicants will be required to invest a minimum of 30% (or $1.5 million at the base level of investment) in NSW Waratah Bonds. Announcements by the other state and territory governments in relation to their requirements for nomination are expected to be made shortly.

What are 'complying investments'?

A 'complying investment' consists of one or more of the following:

  • An investment in a government bond (however described) of the Commonwealth, a state or territory
  • An investment in a managed fund (directly or through an investor directed portfolio service) (summarised below)
  • A direct investment by taking an ownership interest in an Australian proprietary company that is not listed on the Australian Securities Exchange and that operates a 'qualifying business' in Australia (ie passive speculative or investment business is excluded), subject to certain conditions.

Applicants may hold investments in each of the above complying investments and may also switch between the investment options, provided that they meet certain reinvestment conditions. It is likely that the category of managed fund investment will provide the most scope for ready and flexible investment by applicants under the Significant Investor Visa.

Investments in a managed fund

In order to be classed as a 'complying investment', an investment in a managed fund must satisfy the following conditions:

  • The investment is a 'managed investment scheme' (within the meaning of the Corporations Act)
  • The interests are not able to be traded on a financial market
  • No representation has been made to any member of the managed investment scheme that the interests will be able to be traded on a financial market
  • The issue of the interest is covered by an AFSL.

In addition, the managed fund must be limited to categories of investment specified by the Minister in an instrument in writing. These categories include the following:

  • Infrastructure projects in Australia
  • Cash held by Australian deposit-taking institutions
  • Bonds issued by the Federal Government or a state or territory government
  • Bonds, equity, hybrids or other corporate debt in companies and trusts listed on an Australian stock exchange
  • Bonds or term deposits issued by Australian financial institutions
  • Real estate in Australia
  • Australian agribusiness.

Importantly, the managed fund is not required to be registered with ASIC. This will reduce the levels of compliance required by the fund, make establishing funds for the Significant Investor Visa potentially more straightforward and enable the funds to be managed at a lower cost. As noted above, this appears to represent a relaxation and broadening of the requirements for a managed fund to qualify as a complying investment, from the conditions originally announced by the Department of Immigration and Citizenship in August 2012.

What is the term of the Significant Investor Visa?

The Significant Investor Visa operates for an initial term of four years. However, holders can extend their visa term if they satisfy certain requirements (including if they have held complying investments for at least four years and continue to meet the relevant conditions). They will be allowed to extend their provisional visa by an additional two years, with a maximum of two extensions permitted, bringing the maximum total period on a provisional Significant Investor Visa to eight years.

What are the advantages to the Significant Investor Visa?

For migrants, the Significant Investor Visa has a number of advantages over other types of visas. Successful applicants will be granted the following concessions:

  • No upper age limit
  • No requirement to meet a points test
  • A reduced residency requirement of 160 days over four years in order to qualify for a permanent visa.

From the Federal Government's point of view, this new visa will encourage investment into Australia and boost growth in key areas including real estate, infrastructure projects, financial planning and funds management and administration. It will provide fund managers, in particular, with the opportunity to create new locally managed funds to market to wealthy individuals throughout Asia and other parts of the world. This could well provide a 'world of opportunity' for Australian fund managers, in particular those investing in infrastructure, real estate and agribusiness.

© DLA Piper

This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.

DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to

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