Australia: Significant Investor Visa - complying investment categories expanded

On 13 August 2013, the Minister for Immigration and Citizenship expanded the categories of "complying investments" for the Significant Investor Visa (SIV).

The changes are good news for investors and ASIC-regulated fund managers who can now offer a broader range of investment classes to SIV applicants.

New asset classes

From 23 November 2013, ASIC-regulated fund managers will be able to offer these additional asset classes to SIV investors:

  • cash-like instruments held by Australian banks
  • securities that are expected to be listed on the Australian Stock Exchange (ASX) within 12 months
  • annuities issued by Australian life insurance companies
  • derivatives used for portfolio management purposes
  • mortgages, and
  • interests in unregulated managed funds.

Full list of complying investments

The following table includes the full list of complying investments that may be held in eligible managed funds from 23 November 2013 and how they compare with the current regulations.*

Item Complying investments Commentary
1 Infrastructure projects No change
2 Cash held by Australian deposit taking institutions (including negotiable certificates of deposit, bank bills and other cash-like instruments) The inclusion of cash-like bank instruments offers a range of options for investors with higher short-term risk appetites
3 Bonds issued by the Commonwealth Government or a state or territory government No change
4 Bonds, equity, hybrids or other corporate debt in ASX-listed companies and trusts, or those that are expected to be listed within 12 months Fund managers can offer investments in established proprietary companies and trusts proposed to be listed on the ASX
5 Bonds or term deposits issued by Australian financial institutions No change
6 Real estate Real property in Australia No material change (although the meaning of the term "real property" under common law may be broader than the term "real estate" and potentially includes, for example, long-term leasehold property)
7 Australian agribusiness No change
8 Annuities issued by an Australian registered life insurance company in accordance with ss 9 or 12A of the Life Insurance Act 1995 Annuities issued by an Australian registered life insurance company in accordance with ss 9 or 12A of the Life Insurance Act 1995 Annuities can be offered as a new asset class, providing investors with the opportunity to invest through managed funds into a "guaranteed" source of investment income
9 Derivatives used for portfolio management and non-speculative purposes, which constitute no more than 20% of the total value of the managed fund Fund managers can now invest in derivatives for portfolio management and non-speculative purposes, provided that the value of derivatives in the fund does not exceed 20% of the total fund value
10 Loans secured by mortgages over the investments listed in items 1 to 8 of the above list The specific inclusion of mortgages expands investment choices to include secured loans over complying investments other than real property
11 Other ASIC regulated managed funds that invest in the above list of investments The removal of the requirement for underlying funds to be ASIC-regulated means that a fund manager may structure investments through an unregulated sub-trust structure

*Changes are in bold and strikethrough text

What does this mean?

While the changes enable ASIC-regulated fund managers to offer a broader range of asset classes, there are no changes to the types of complying investments already available for direct investment by SIV applicants (namely, government bonds and Australian proprietary companies with qualifying businesses).

To date, the Department of Immigration & Citizenship (DIAC) has reported that the majority of SIV applicants have stated that they will elect to invest into government bonds, with only about 10% of applicants identifying an ASIC-regulated managed fund as their complying investment choice.

These changes are a boost to the Australian funds management industry, giving greater flexibility to fund managers to tailor SIV compliant funds to meet investors' risk-reward appetites. A broader range of investment opportunities will now be available for SIV investors who can switch their complying investment at any time during the four year provisional visa period, provided they re-invest within 30 days of withdrawing an investment. You can read the DIAC instrument here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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