So it is a good time to have a look at our two year old SIV. Has it succeeded in doing what it was meant to do and is there any need for early intervention?
It was with great fanfare that the SIV was introduced in November 2012 and the interest has continued. This is a pathway through which investment capital will flow into Australia from high net worth individuals overseas. Provided they meet the fairly straightforward criteria including the transfer of $5 million into a complying investment in Australia, the individual and their family members will be granted 4 year multiple entry provisional visas. To be granted a permanent visa, the main applicant will need to spend at least 160 days in Australia over that 4 year period and keep the investment of $5 million in Australia (though it can be moved around). There is no age barrier or requirement to have a certain English level.
The main applicant does however need to provide evidence that they lawfully own the funds and that the funds have been accumulated through legitimate means. Legitimate means includes a gift (though the source of the gift will need to demonstrated), the sales of assets, dividends from investments, profit from the operation of a business, a loan from a financial institution (against assets worth more than $5 million) or an inheritance or other windfall gain (such as a lotto win). It is this requirement that seems to be causing the greatest problem as sometimes, providing evidence on paper that the funds are legitimate is not easy, particularly in countries where the cash economy is often the norm. This has led to some very long delays in processing applications, particularly through the Australian Immigration office in Hong Kong, though it appears to be getting faster.
After the introduction of the visa, the first SIV application was approved in May 2013 and since then (up until the end of August 2014) there have been a further 385 applications approved. This may not seem like a lot but when you think that this converts into $1.93 billion in complying investment, it is a significant amount of foreign capital coming into Australia.
Most of the approved applications have been nominated by the Victorian government (50%) followed closely by New South Wales (about 38%), and by far the greatest source country is China with 88% of the approved applications coming from people living in mainland China.
Of course there have been the critics of the scheme. In February 2014, Canada ceased its equivalent scheme, though a much lower amount of money was required to get an investment visa for Canada. This is claimed to be in part due to the scheme resulting in surges in property prices and the creation of “zombie” suburbs where most of the apartments lie empty for much of the year as the owners live overseas. It has also been suggested that the property price increases in parts of Sydney in recent months have been the result of Chinese investors buying up property for above market value. Recent media stories on the high prices paid at auction have tended to zero in on people who look like they are foreigners without any real evidence that this is the case. I don’t think you will find anyone selling their homes complaining about getting an above market price and as it is assumed that this money is circulated in the Australian economy, there is still an overall gain financially to Australia.
Some changes have been taken over the last 2 years to make the requirements for the SIV less rigid and these have been from both the Federal Government and some of the state governments. For example in August 2013, the Minister for Immigration announced an expansion in the list of complying investments and in August 2014, the NSW state government announced that an applicant was no longer a requirement to put $1.5 million in the Waratah (state government) bonds to get sponsorship from NSW.
In March this year (now some 6 months ago), the Assistant Minister for Immigration and Border Protection announced a review of the SIV program as it was felt that it needed a boost. The review was meant to look at processing issues, the possibility of greater flexibility in investment choices and perhaps the introduction of a permanent visa stream for investors. The outcome of the review has just been announced with some interesting upcoming changes including:
- The creation of a Premium Investor Visa (PIV) which requires an investment of AUD 15 million, nomination by Austrade (Australian Government Trade office), no residence requirement and permanent residency in 12 months (closest thing to buying permanent residency in Australia)
- Greater involvement of Austrade in determining complying investment policy for the SIV
- The ability to swap the main applicant between the provisional and permanent visa stage for all business visas (this is a great improvement as either partner will be able to meet the residency requirement in Australia when it is introduced)
- Range of changes to improve the timing of processing which as indicated above, is already happening
So I guess we need to go back to our initial question – is our 2 year old doing OK and do we need intervention? It seems that although it was a bit low in starting, our SIV is gaining momentum and reaching the milestones that would be expected. There is the recognition from all levels of government that more flexibility should be introduced and I think this intervention is a good thing. While there needs to be some recognition of a cash economy in some countries and therefore more flexibility in documenting the source of funds, I don’t think any Australian would want to see this scheme as a front for money laundering. There is a fine balance but local knowledge and perhaps more ability to look at applicants on a case by case basis (which will mean an easing of the policy surrounding documentation of the source of funds) would allow faster processing and more interest in the program.