James Riley
February 19, 2014

SIV approvals start to flow

SIV approvals start to flow
 

The log-jam choking the approvals process of the Significant Investor Visa program has started to clear. But whether any of this money finds its way into innovative Australian companies is an open question.

It is still early days. And potential venture capital companies pulling together groups of SIV investors to build new funds have not emerged, publicly at least. We wait to see whether any will.

In mid-August last year, just ten visas had been issued in the period since the program began in November 2012.

By mid-November that number had grown to 65, and at the end of the year, a total of 88 visas had been issued under the SIV program (a conveniently magical number, given most of those applying at Chinese!)

So the approvals run-rate has started to improve. About 70 of those visas have been issued in the five months the Abbott Government was elected last September.

The Department of Immigration reported that up to the end of 2013, it had received 943 expressions of interest, or which 737 had been formally invited to apply for a significant investor visa.

So far, 601 applications have been lodged with the department. That is about double the number of formal applicants for the visa in the five months since the Coalition formed government.

To recap: The SIV program lets potential investors in Australia who have a minimum of $5 million to park in this country to qualify for sub-class 188 Business Innovation and Investment (Temporary) Visas. These have a lower language proficiency and residency requirements, and can be converted to a permanent visa known as a sub-class 888.

The raw numbers above mean that 88 SIV visa holders have so far stumped up $440 million in investment dollars into Australia. And if all 737 of the people that have been invited to formally apply choose to accept the invitation, there is a further pipeline of $3.6 billion in investment dollars heading our way.

Which all sounds great. But this is an under-scrutinised program. It is still impossible to see where the money is going and whether it is creating the value that had been envisaged.

And while the Coalition has come good on its promise to speed-up the approvals process, it is not at all clear whether it has created a more targeted scheme.

Immigration Minister Scott Morrison trumpeted government’s intention to get 888 visa money into the hands of Australian SMEs in one of his first speeches as minister. This has not happened.

The Assistant Immigration Minister, Western Australian Senator Michaelia Cash was given the job of re-booting the scheme. But so far, the “re-boot” has taken the form of a relaxation of some of the investment rules to allow for “greater investment flexibility.”

“The government is working closely with the financial services industry and other stakeholders to offer greater flexibility and investment choices to enhance the attractiveness of the significant investor visa for investment migrants,” Senator Cash said.

So we know for sure that the financial services sector is very happy about this program. And why wouldn’t they be? But whether or not the scheme is working as it was intended if the lion’s share of investments are simply parked in a managed fund for the four years it takes for a visa to ‘vest’.

Same goes for governments. They’re happy as clams because most states require 30 per cent of the SIV investment to go into government bonds.

And it has been made easier to invest in property. This may yet become a problem. Because whether its a managed fund dropping money into property of the visa applicant themselves, this will direct a lot of new money into the capital city property markets.

The reasoning behind this is this: Government wants visa holders to sink roots into the community. We want these smart international entrepreneurs to not just become permanent residents, but to settle here (and to bring their magic dust with them.)

That’s the ideal. But parking money in property for for years is not what this scheme was set up to do (or having a managed fund buy property on their behalf) and will create political heat.

Let’s hope this scheme gets an adequate review within the next year, and tweaks made where needed to ensure it is working the way that was intended.

And another thing: Last time I wrote a blog on this topic, the story was immediately stolen – cut and pasted under someone else’s name – and put on an SIV investment broker’s website as marketing content. So we know for sure that the SIV scheme has attracted the usual god-awful cowboys and spivs. What a surprise!

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