Significant Investor Visa vs. Premium Investor Visa: Implications for high net worth visa applicants.

The Evolve team takes a look at how the recently announced Premium Investor Visa (PIV) is positioned relative to the current Significant Investor Visa (SIV) and the resulting implications to intending high net worth visa applicants to Australia.

A new business and investment visa class

On Tuesday, 14 October 2014, Prime Minister Tony Abbott announced that a new visa class known as the PIV will be introduced from 1 July 2015. While further particulars will be announced in coming months following a period of consultation, the Government has earmarked the key criteria. These are set out below and compared against corresponding criteria under the SIV.

The PIV and SIV

In our experience, there are invariably a number of common issues that arise in the context of high net worth visa applicants. With the announcement of the PIV together with certain amendments to the SIV program, below is a summary of the impact of these announcements on some of the common issues.

1. Source of funds

Under the SIV, the funds used to make a complying investment must be unencumbered, legally acquired and owned by the applicant. We do not expect that this will be any different for PIV applicants.

However, we have found that proving ‘ownership’ of funds has its challenges for SIV applicants, particularly where the applicant is not necessarily the legal holder of assets. As it may be unrealistic to expect that a PIV applicant will hold $15 million in his / her own name, the success of the PIV will require the Government to provide clear indication on the extent to which beneficial ownership arrangements (or certain ‘control’ arrangements) will be recognised for a PIV applicant.

2. Residence requirements

The current position for SIV applicants is that only the primary applicant needs to satisfy the residency requirement of 160 days over 4 years (any secondary applicants can remain offshore). This feature has been used by applicants to structure their affairs such that the main income earner of a family unit is permitted to remain offshore to attend to business affairs while the spouse satisfies the residency requirements in Australia (often with the family’s children).

However, the Government appears to have closed this option by announcing that the SIV will shortly require secondary applicants to reside in Australia for 180 days per year.

Accordingly, if it is imperative for a family member to remain offshore to attend to business and other affairs, it appears that this can no longer be achieved under the SIV (given all family members will have a residency requirement) and applicants with such requirements will be required to apply under PIV.

3. Tax residency

A key concern of many SIV applicants is the extent to which they would be recognised under Australian law as a tax resident. Given the relatively low residency requirement of 160 days over the course of 4 years, the SIV generally provided applicants with comfort that their affairs could be managed in a way where they would not be regarded as an Australian tax resident.

However, as the 180 days per year residency requirement will be introduced by the Government in a bid to require family units of SIV applicants to settle and establish a presence in Australia, managing tax residence issues for SIV applicants is likely to be increasingly difficult.

Conclusions – Shifting incentives

It is apparent that some of the advantages currently afforded to applicants under the SIV program will soon be closed off and made available only under the PIV program. Although the SIV still offers ample flexibility, applicants seeking to achieve permanent residency in Australia with specific residency and taxation objectives may find that a $15 million PIV visa is the only viable option.

This result is not surprising given the Government’s intention to ensure that foreign investments are channelled into areas of the Australian economy that need it most.

Evolve Lawyers has extensive experience acting for intending business and investment migrants, particularly those from the Asia Pacific region. We will be making submissions to the Government on the above matters and other proposed amendments to the business and investment visa streams over coming months. We welcome any additional thoughts or comments from our readers.