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Australia | Introduction of the Business Innovation and Investment Program

GES Newsflash

Deloitte | GES Newsflash30 May 2012


The Minister of Immigration and Citizenship announced major reforms to the Business Skills Migration Program to take effect on 1 July 2012.

The Business Innovation and Investment Program will supersede the Business Skills Migration Program on 1 July 2012, with the objective of attracting and increasing entrepreneurial talent and diversifying business expertise in Australia. The Australian Government has introduced new measures to attract high-net-worth individuals who are willing to invest in Australia, add value to Australian exports and drive innovation.

The changes are a result of a far-reaching review of the Business Skills Migration Program by the Government to attract people who are prepared to make significant investments to enhance job opportunities for Australians and boost Australia’s economic growth. The changes are also a move to remain competitive with other countries around the world, including Canada, the UK and Singapore, in attracting capital investment from overseas investors.

Some of the key changes are outlined below.

Simplifying and reducing the number of visa subclasses

As part of the Government’s initiative to reduce the number of visa subclasses across all visa programs, the Business Innovation and Investment Program will include three visa subclasses:

  • Business Talent Visa (subclass 132)(permanent residence)
  • Business Innovation and Investment Visa (subclass 188)(provisional)
  • Business Innovation and Investment Visa (subclass 888)(permanent).
Business Talent Visa (subclass 132)(permanent residence)

There are two streams for this visa subclass:

  • Significant Business History Stream
    • Intended for high-calibre business owners who have a genuine and realistic commitment to manage a new or existing business in Australia. The requirements for this stream remain unchanged compared to the current Business Talent criteria
  • Venture Capital Entrepreneur Stream
    • Intended for migrant entrepreneurs with a high-potential business idea who have sourced at least A$1 million in venture capital funding through a member of the Australian Venture Capital Association Limited to start up the business, commercialise a product, and develop and/or expand a business.

All applicants must meet minimum business or investment requirements – see the table below.

Applicants must be invited and nominated by an Australian State/Territory, having submitted an Expression of Interest (EOI) in SkillSelect. Please refer to further information in the SkillSelect section below.

Business Innovation and Investment Visa (subclass 188)(provisional)

There are two streams for this visa subclass:

  • Business Innovation Stream and
  • Investor Stream.

The main criteria for this visa are:

  • Nominated by an Australian State/Territory, having submitted an Expression of Interest in SkillSelect. Please refer to further information in the SkillSelect section
  • No minimum English requirement
  • Less than 55 years old (or obtain a waiver from a State/Territory Government)
  • Meet minimum business or investment requirements – see the table below
  • Meet the criteria of the Innovation Points Test – this is one of the key changes, which aims to give weight to innovation and business performance. Please refer to further information in the Innovation Points Test requirements section below.

Applicants under the Business Innovation Stream may be eligible to extend their visa for a further two years subject to nomination by a State/Territory. This is currently unavailable under the current program.

Business Innovation and Investment Visa (subclass 888)(permanent)

Similar to the provisional visa stage, there are two streams for this visa subclass:

  • Business Innovation Stream and
  • Investor Stream.

The main criteria for this visa are:

  • Hold a provisional Business Innovation and Investment Visa
  • Met the objectives of the provisional visa
  • Met the business metrics or investment requirements of the Business Innovation Stream or the Investor Stream, noting that asset thresholds have been increased by the Government to better align with the Australian business community.

The new minimum asset and turnover requirements are as follows:

Subclass Net assets Turnover AUD
Business Innovation Stream – subclass 188 $800,000 $500,000
Investor Stream – subclass 188 $2.25 million Not applicable
Business Innovation Stream – subclass 888 $600,000 $300,000
Significant Business History Stream – subclass 132 $1.5 million  $3 million
  • Ownership in the Australian business must not have been acquired from an applicant or visa holder of a Business Innovation and Investment (subclass 888) Visa. The intention of this is to eliminate the ‘recycling’ of businesses from one migrant to another
  • The primary applicant for the provisional visa stage must be the primary applicant at the permanent visa stage – this change removes the ability of a partner to “swap” being the primary applicant from the provisional stage to the permanent stage, thus changing the applicant’s genuine commitment to Australia
  • Compliance with Australian business and taxation laws, including laws related to workplace relations, superannuation, health and safety.
Significant Investor Stream

This stream involves both the Business Innovation and Investment (subclass 188 provisional) Visa and (subclass 888 permanent) Visa. Similar to the above streams, this visa requires applicants to be invited and nominated by the State/Territory Government having submitted an Expression of Interest in SkillSelect. The applicant must also make an investment of at least A$5 million into State/Territory government bonds, and/or ASIC-regulated managed funds with a mandate for investing in Australia and/or direct investment into Australian companies. This excludes investments held in superannuation.

Recognising that high-calibre investors manage large business portfolios overseas and have business obligations overseas, applicants under this stream have a lower ‘physical residence in Australia’ requirement on a subclass 188 provisional visa.

SkillSelect

On 1 July 2012, the Government will implement SkillSelect as part of the application process for all applicants under the Business Innovation and Investment Program. SkillSelect is also compulsory for other visa categories, including independent visas, regional sponsored visas and State/Territory sponsored visas.

SkillSelect is the migration selection process whereby applicants lodge an online Expression of Interest which details their personal information and intentions in Australia (i.e. investment, employment, business ownership, etc). Applicants will subsequently be “ranked” according to an objective and automatic system which does not involve Department of Immigration and Citizenship (DIAC) case officers. For certain visa subclasses, including visas under the Business Innovation and Investment Program, applicants must receive an invitation to lodge a visa application before a submission is made to the Department of Immigration and Citizenship.

The Government has indicated that processing timeframes will be reduced with the introduction of EOI submissions as the Government will be able to manage who is able to apply for certain visa subclasses, when they are able to apply and how many applicants can apply. The Government will base its management of these submissions on the perceived needs of the Australian economy.

Innovation Points Test requirements

The Innovation Points Test requirement relates only to the Business Innovation and Investment Subclass 188 provisional visa. It aims to select innovative entrepreneurs who will transfer skills and diversify the existing Australian pool of business expertise. The current pass mark is 65 and points are awarded under the following criteria:

  • Age – points will be allocated according to the age of the applicant at the time of invitation. For applicants over 55 years, no points will be allocated and exceptional economic benefit must be proven before a State/Territory nomination is approved
  • English language – 5 points are awarded for vocational English and 10 points for proficient English-language ability. Applicants for this visa must have at least functional English. Those who cannot demonstrate functional English must pay a second instalment visa application charge
  • Qualifications – 5 points are awarded for trade qualifications, diploma or bachelor degrees by an Australian educational institution and 10 points for bachelor degrees in business, science or technology by an Australian educational institution. Bachelor degrees from other educational institutions may be acceptable if it meets a recognised standard
  • Experience in business or investment – points are awarded for years of business or investment experience, relevant to the visa stream to which the applicant is applying
  • Net personal and business assets – points are awarded for meeting the minimum thresholds (A$800,000 of net business and personal assets for Business Innovation Stream applicants and A$2.25 million of net business and personal assets for Investor Stream applicants) and higher points will be awarded for greater levels of assets
  • Business turnover – points are awarded for ownership interest in a business with a specific amount of business turnover in at least two of the four fiscal years before the invitation. For Business Innovation Stream applicants, business turnover must be at least A$500,000. There is no business turnover requirement for Investor Stream applicants
  • Innovation – points can be allocated for more than one of the following categories:
    • Registered patents or registered designs
    • Registered trademarks
    • Joint venture agreements
    • Export trade
    • Gazelle businesses (Gazelle businesses are newly established businesses experiencing rapid growth during a short period of time)
    • Receipt of grants or venture capital funding for an innovative business idea
  • Special endorsement – 10 points may be awarded by a nominating State/Territory that considers a business proposal to be unique and critical to the State/Territory.
Transitional arrangements

Current provisional Business Skills Visa holders are not eligible to apply for a Business Innovation and Investment Visa and must only apply for permanent residence under the Business Skills Visa Program.

Applicants who have lodged a visa application under the current Business Skills Migration Program before 1 July 2012 will be assessed against the current criteria and will not be affected by these changes.

Deloitte View

The announcement by the Australian Government of a number of major initiatives to improve skilled migration is welcomed by Deloitte. The revised Business Innovation and Investment Program, with its focus on attracting investment from Asia, is a welcome change to attracting inbound investment and entrepreneurial business talent to Australia.

The Australian Government will want the message arising from this announcement to reach the Asian business community that Australia welcomes skilled migrants who have a track record of creating wealth and opportunity through their own business efforts.

This new generation of business migrants will require careful planning of their migration, tax and advisory needs if they are to access these new programs. While the program represents a clever use of skilled migration policy to create economic growth and investment in Australian business, it must be remembered that these changes only bring us into line with Canada, the UK, Singapore and New Zealand.

Statistics maintained by the Australian Government indicate that business migrants applying under the existing Business Skills Program established businesses in industry sectors which created little or no flow-on employment in the local labour market. This clearly indicates that the current program required reform to align the program to the needs of Australia’s broader labour supply and strategic objectives, including economic and labour market demands.

The simplification of visa subclasses is a commitment that the Australian Government undertook to reduce the number of visas and remove the number of unused visa subclasses. Deloitte believes this complements the decision by at least one State Government to simplify the requirements for nomination under the new Business Innovation and Investment Program, which are likely to be confirmed closer to the implementation date of 1 July 2012.

The introduction of SkillSelect and Expressions of Interest has caused some concern with respect to adding an onerous process before submitting a visa application. The lack of transparency regarding the ‘ranking’ system has also caused some concern with respect to the uncertainty of how the EOIs will be assessed and chosen.

However, despite this, Deloitte believes that the SkillSelect implementation will give rise to more certainty when applying for a visa. Improved processing timeframes and the removal of lengthy application queues and pipelines is also an added benefit of having an invitation-only process.

As we wait for the Department of Immigration and Citizenship to announce the priority processing arrangements, Deloitte will closely monitor how it will manage how many EOIs are in the pipeline and how many visa applications are waiting to be processed. With an expectation of 7,000 investment visas to be granted as a result of the 1 July 2012 changes, Deloitte anticipates that DIAC will issue the first round of invitations at the end of July 2012, and that processing will be relatively streamlined as DIAC pushes to increase capital investment in Australia as soon as possible.

As an immediate course of action for anyone considering applying for a visa under the new Business Innovation and Investment Program, we strongly recommend the following considerations:

  • Consult with a qualified Australian migration expert who is familiar with the current and proposed policies and who can provide sound and tailored advice regarding the 1 July 2012 changes. The proposed changes are complex, and include changes to immigration law and policy, as well as implications for taxation and financial planning
  • Prior to making any investment or business decisions (overseas and in Australia), consult with a specialist tax expert who is experienced in the tax environment in Australia and in the overseas country where the applicant originates. Poorly planned decisions may result in additional and unnecessary tax costs and unforeseen regulatory compliance issues which can be avoided if specialist tax advice is sought prior to commencing any application to migrate to Australia
  • Seek advice from human resource, superannuation, expatriate tax and employment law experts, as compliance with these regulations is now critical to a successful permanent residence application
  • Consult with the Government agency of the State/Territory which the applicant is considering migrating to and investing in. It is Deloitte’s experience that by opening a dialogue with the State/Territory agency early, the process is much more transparent and the applicant is able to individually present his/her unique business case for consideration.

Contacts

Brisbane

Shelley Nolan
Director | Deloitte Tax Services Pty Ltd
Direct: +61 7 3308 7232
MARN: 0635132

Melbourne

Paul Rubinstein
Director | Deloitte Tax Services Pty Ltd
Direct: +61 3 9671 7603

Perth

Sheelagh Blackenberg
Manager, Deloitte Tax Services Pty Ltd
Direct: +61 8 9365 7156
MARN: 0100161

Sydney

Mark Wright
Director, Deloitte Tax Services Pty Ltd
Direct: +61 2 9322 7454
MARN: 9793644

 

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