On 24 November 2012, the Department of Immigration and Citizenship's (DIAC) SkillSelect system began accepting "expressions of interest" for the Significant Investor (subclass 188) visa. This new visa stream, announced in May 2012 as part of the Government's business innovation and investment program, offers eligible applicants a pathway to permanent residence in Australia through the subclass 888 visa, and could potentially provide a new source of investment for Australian businesses, managed funds and governments.


Applicants for the new Significant Investor stream will be required to have access to a minimum $5 million available for investment in "complying investments" in Australia. Visa holders may invest the total amount in a single investment, or a number of investment options. "Complying investments" include:

  • Commonwealth, State or Territory government bonds;
  • Australian Securities and Investment Commission (ASIC) regulated managed funds with a mandate for investing in Australia; and
  • direct investment into private Australian companies not listed on the Australian Stock Exchange (ASX).

Intending migrants are not able to apply outright, but will first be required to lodge an "expression of interest" with DIAC through SkillSelect. As with other visas in the business innovation and investment program, nomination by a State or Territory government will be a requirement. DIAC can then "invite" those who have expressed an interest in the visa to lodge an application.

Visa Period

The subclass 188 visa is granted on a provisional basis for 4 years, with a residence requirement providing for the holder to spend at least 160 days in Australia over the initial four years. The visa holder can then apply for the permanent (subclass 888) visa or a 2 year extension to the visa (subject to satisfying a further residence requirement). A maximum of two extensions will be granted.

In order to qualify for the subclass 888 visa, applicants will need to demonstrate that they have been resident in Australia for at least 40 days for each year or part year that the applicant held the provisional subclass 188 visa. While the legislation does not define "year", further clarification is required as to how this criterion will affect some subclass 188 holders' eligibility (it appears to place a more onerous residence requirement on those applicants granted a subclass 188 in later months of the year).

Note also that the subclass 888 visa requires the applicant to have held the provisional visa for a continuous period of at least 4 years. Given that the initial subclass 188 visa can only be granted for a maximum period of 4 years, a strict interpretation suggests that at least one extension will be required in order to qualify for the permanent visa. Once again, further clarification from DIAC is required.

State/Territory Nomination

Intending migrants need to be aware that State or Territory governments may impose additional investment requirements for the purposes of nomination, beyond the minimum requirements stipulated by DIAC. For example, the New South Wales Government will require applicants to invest at least 30 per cent of the $5 million in New South Wales Waratah bonds in order to qualify for nomination by that State. Other States and Territories may choose to impose similar conditions.

Unlike other visas in the business innovation and investment program, there is no DIAC requirement for applicants for the Significant Investor stream to demonstrate that they have had a successful business career "overall". However, intending migrants should be aware that information on their business background and experience will likely be required by State and Territory government bodies in order to nominate the individual.

Applicants will need to demonstrate that they genuinely intend to live in the nominated State/Territory. Nominating bodies may also refuse to nominate an individual where the complying investment appears to offer little benefit to that State/Territory (a State is unlikely to nominate an applicant who has indicated that they will be investing in a managed fund that invests primarily in real estate in some other State/Territory).

"Complying Investments"

Applicants will need to confirm that the $5 million investment will be made into specified "complying investments". Once invested, visa holders can change between complying investments, subject to meeting reinvestment requirements (withdrawn funds must be invested into another complying investment within 30 calendar days).

The value of the initial investment will need to be at least $5 million. The Australian Government and DIAC do not provide any guarantee that the investment will retain its value over the period of the visa. If the value of the investment drops below $5 million, visa holders are not required to provide additional funds in order to continue holding the visa. However, in order to qualify for the permanent (subclass 888) visa, DIAC policy indicates applicants will need to demonstrate that the value of the investment has been maintained.

Where the value of the $5 million investment increases, the Department has indicated that visa holders will be prohibited from withdrawing the profit (even if the total value remains above $5 million). According to DIAC policy, dividends will be considered normal investment earnings, however a "return of capital" will potentially breach the conditions of the subclass 188 visa and render the holder ineligible for the permanent visa. The onus is on the holder to demonstrate that any dividends received should not be considered capital returns.

Investments must be held in the name of the applicant themselves, or in the name of the applicant and their spouse/de facto partner. They must be made directly by the applicant (and, if applicable, their spouse/de facto), or through qualifying companies or trusts. As with other visas in the business innovation and investment program, the applicant will need to demonstrate the source of the funds used to make the investment, including evidence that the funds are "unencumbered" and "lawfully acquired". Investments cannot be held within superannuation.

Complying Managed Fund Investment

DIAC has announced that ASIC regulated managed funds will qualify as a "complying investment" for the purposes of the Significant Investor visa.

The Department has indicated that a complying managed fund must be regulated by ASIC and open to the general public. The fund's manager also needs to provide a compliance declaration on Form 1413 confirming that the mandate for the fund is in Australian assets only, and limited to the following:

  • infrastructure projects in Australia;
  • cash held by Australian deposit taking institutions;
  • bonds issued by a State or Territory government;
  • bonds or equity in Australian companies listed on the ASX;
  • bonds or term deposits issued by Australian financial institutions;
  • real estate property in Australia; and/or
  • other ASIC regulated managed funds that invest in the above assets.

DIAC has indicated that funds registered with ASIC under Chapter 5C of the Corporations Act 2001 and unregistered managed funds administered by a trustee who holds an Australian Financial Services Licence (AFSL) will be acceptable as complying investments for the Significant Investor visa.

DIAC will still consider unregistered funds to be open to the "general public", despite the threshold requirements for wholesale investors. Funds that restrict investment to applicants of the Significant Investor visa only will be unlikely to meet the requirements of a "complying investment" as such funds cannot be considered open to the public.

Direct investment

Direct investment into non-ASX listed companies can satisfy the requirements of a "complying investment". In order to qualify, the applicant must have an "ownership interest" in a "qualifying business". The DIAC definition of "ownership interest" includes shareholders, partners and sole proprietors (including indirect interests held through companies, partnerships or trusts). Generally, a "qualifying business" must:

  • be genuinely operating in Australia;
  • be registered with ASIC; and
  • have an ABN.

Specific criteria must be met for direct investment into private companies. Specifically, regulation 1.03 of the Migration Regulations 1994 defines a qualifying business as an enterprise that:

  1. is operated for the purpose of making profit through the provision of goods, services or goods and services (other than the provision of rental property) to the public; and
  2. is not operated primarily or substantially for the purpose of speculative or passive investment. (emphasis added)

According to the regulations and DIAC's Procedures Advice Manual, most forms of property investment would be specifically excluded from the above definition. Intending migrants seeking to invest in property in Australia would therefore need to consider doing so through a complying managed fund.

Commonwealth, State or Territory Government Bonds

The types of bonds available for investment for applicants of the Significant Investor stream are broader than those available under other "designated investments" through the business innovation and investment program (which limit the applicant to only State or Territory government bonds). For the purposes of the Significant Investor stream, the definition of a "complying investment" specifically refers to "a government bond (however described) of the Commonwealth, a State or Territory" – note that Commonwealth bonds are included.

Investors should be aware that governments may impose additional requirements for the purposes of State/Territory nomination, and bond issuers may have their own criteria in relation to individual investments.


This new visa stream is expected to provide new opportunities for migrants to gain residence in Australia and make a contribution to the Australian economy. The initiative may also be of interest to Australian businesses and fund managers seeking foreign investment.

Clients with questions or concerns about the requirements of the visa or further information on how to apply should contact Hall & Wilcox for detailed advice.?

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.