NSW drops SIV bond rule


James Riley
Editorial Director

Competition among the states for investment dollars being channeled through the Significant Investor Visa program has forced New South Wales to drop its requirement for 30 per cent of migrant funds to be put into Waratah Bonds.

NSW was the only state that insisted SIV applicants buy state bonds, a policy that gave fund managers and migration agents all the incentive they needed to direct SIV dollars elsewhere.

A chief beneficiary has been Victoria. Sydney might be the nation’s financial capital, but a disproportionate lion’s share of the SIV visas – and therefore the investment dollars – have been directed to Victoria.

According to the latest SIV figures released in June, Victoria had issued 633 formal invitations to SIV applicants, while NSW had issued just 370 – despite its larger economy and status as the nation’s financial centre. (Invitations are issued on the basis of where the SIV migrant applies.)

Under the Significant Investor Visa program, successful applicants must invest

$5 million in complying investments in Australia for a minimum of four years before becoming eligible to apply for permanent residency as a pathway to citizenship.

Until now, SIV applicants wanting to settle in NSW had to invest at least 30 per cent – or $1.5 million – in NSW Waratah Bonds. That meant the agents and fund managers had $1.5 million less to play with.

From September 1, the Waratah Bond requirement has been dropped.

Whatever benefits NSW gained from having 30 per cent of all its SIV money poured into bonds had clearly been outweighed by the numbers of SIV applicants it was missing out on.

SIV expert and Basis Point managing director David Chin says the requirement mean that funds and agents had pushed the credentials of the other states before NSW, for no other reason than it would give them access to the whole $5 million.

Dropping the requirement gives fund providers more incentive to promote NSW to the largely Chinese high net worth individuals would make up the program, Chin says.

In announcing the changes, NSW deputy premier and minister for trade and investment Andrew Stoner said the Waratah bonds remained a “safe, fee-free and low-risk option for investments for SIV applicants,” clearly hoping that at least some of the SIV funds do end up in the Waratah  safe haven.

But Basis Point’s Chin says the real interest in SIV migrants should not be on the initial $5 million in funds, which only need to be in complying investments for four years. Instead, he says, the real longer term value will be in the money and connections of these high net worth individuals that is behind that initial $5 million investment.

For the tech industry, and in particular the internet-enabled startup sector, the SIV program has shown little. But Chin says the new generation of internet entrepreneurs in China will start showing up in Australia – and their investments will gravitate to the sectors where they have already enjoyed success.

He points to the increasing numbers of Chinese internet companies that are listing in the US that are creating US dollars millionaires in huge numbers.

The  Alibaba IPO alone is expected to create many hundreds of millionaires among its senior management and early employees, whose funds will be outside of the China. This new generation of Chinese high-tech millionaire will be among those looking at the Australian in the next several years through the SIV program.

“However, the main opportunity is not just the $5 million in complying SIV investments but further capital that can be invested by high-net-worth investors – who may be worth $20 million to $50 million – as they pivot into Australia” Chin said.

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