New SIV Complying Investment Framework

indexAustrade has just confirmed the new Significant Investor Visa (SIV) investment framework  effective 1 July, 2015. The objective is to encourage investment into innovative Australian ideas and emerging companies.

The main difference from the initial proposal is the reduction in the amount that must be allocated to early stage venture capital to just 10% of the portfolio. Industry consultation has resulted in several other minor amendments as well.

Venture Capital and Growth Private Equity Funds (VCPE) – $500,000

Mandatory investment of at least $500,000 in AusIndustry registered funds (either ESVCLP or VCLP). The Government expects to increase this to $1 million for new applications within two years as the market responds.

Venture capital funds generally draw down committed capital over the first few years as they identify investment opportunities. The uncalled capital will be held in escrow in a Cash Management Trust or Australian bank account as security for a bank guarantee in favour of the Venture Capital fund.

For an overview on the ESCVLP/VCLP structures, check out our recent article here.

Emerging Companies – $1,500,000

At least 80% of the investments must be in companies with a market cap at investment of less then $500M. The balance can be unlisted stocks, larger stocks and up to 10% in overseas stocks. There must still be a minimum of 20 stocks in the portfolio, with no stock to be greater than 10% of the total fund value.

Balancing Investments – $3,000,000

In addition to managed funds, Listed Investment Companies (LIC’s) can be used to invest in the complying assets which include Australian corporate bonds, shares and property.

Previously derivatives were capped at 20%, and in the original proposal that also included cash holdings, but the final framework is maximum 20% cash within a fund, and derivatives to be used for risk engagement purposes only.

A clear pathway for investment migration

Now that the new complying investments framework is known, SIV Applicants and their advisors can  plan their move to Australia with confidence.

If you have any queries about the program please feel free to  contact us.