Chinese investors heading our way

As most of us brace for depths of winter, having recently returned from a whirlwind ten day, invest in Australia roadshow to China things are only getting hotter over there. 

As the Chinese enter their summer my recent travels there taught me that the Chinese entrepreneurial spirit and passion for growth is stronger than ever and things are likely to continue to heat up. What do I mean by this? Well it was obvious to me travelling through cities including Guangzhou, Xiamen, Nanjing, Dalien, Harbin, Jilin, Changchun, Shenyang and finally to Beijing in northern China that the Chinese people and China never stands still.

On a popular Chinese social media site, one of the most-tweeted lines is: “If we don’t pursue dreams today, we will be too old to do so tomorrow.” The pace of change and growth in China is phenomenal and a significant dream for many Chinese is to expand their business interests into other markets while also giving themselves a safe haven for some of their wealth and an opportunity to live or spend an amount of time in a western environment.

The purpose of our trip was to further strengthen our relationships with immigration agents and their clients in these cities. We presented to over 400 interested people during our visit with a number of our presentations sponsored by the private banking arms of Bank of China and HSBC. In our presentations we partnered with an Australian immigration lawyer to outline to these interested people what it is like living in Australia, the business environment, the types of visa’s available and how we can help them and their families with a smooth transition for their business and family lives in Australia.

A poll of Chinese millionaires reveals that 65% of them want to gain permanent residence in overseas Countries. They give various reasons for wishing to do so such as a desire to access better education for their children, a desire to escape the extreme pollution found in much of China and legal uncertainty about the status of their wealth in China. After twenty years of rapid economic growth, it is estimated that there are some one million US dollar millionaires in China. Hurun, a Chinese company based in Shanghai interviewed 400 such millionaires about their attitudes to emigration. The poll found that 65% of those interviewed wanted to leave the country or, at least, to obtain a permanent residence visa which would enable them to live elsewhere if they wished to. 30% of those interviewed had already acquired foreign permanent residence visas.

Australia is an attractive proposition for many wealthy Chinese and it has been reported that Chinese make up 91% of the significant investor visa applications in Australia. And it has never been more attractive. Particularly in northern China the natural attraction for many Chinese has been Canada and the US. For many years Canada ranked among the top choice for Chinese investor-immigrants given its relaxed immigration policies and generous health and education systems. But in February this year Canada scrapped its longstanding Immigrant Investor Program, which allowed individuals to effectively gain permanent residency. Australia is a real alternative for these disheartened people and as we moved through China we spoke to many who will now proceed to an application in Australia.

The Australian significant investor visa program which was announced in 2012, has so far had 1,446 EOI’s (expressions of interest), 928 Applications and 255 SIV Grants been issued as at 31 May.  The approval rate has climbed from 29 to 40 per month over the past two months and the Government has recently announced they are looking to speed up the typical 4 to 6 month application process to further encourage applications. The visa and permanent residency requires an applicant to invest $5m in Australia, be that in an active trading business or approved managed funds / cash assets. The invested funds need to remain in Australia for a period of four years and the applicant is required to spend 160 days in Australia over four years before gaining permanent residency.

While there are other compliance obligations regarding verification of source of funds and other financial and tax requirements the visa in itself is relatively free of red tape if the applicant has the capital to invest.  At our presentations we discovered that there were numerous individuals who found this proposition very attractive and there are a number of individuals proceeding to application stage. Australia is also highly attractive given our climate, education and healthcare systems and financial stability.

You may ask how do you capitalise on this wave of Chinese investment. While many investment banks are developing SIV compliant managed funds and other products for applicants, and this will be attractive to many seeking a passive wealth diversification strategy, we have found that the entrepreneurial spirit in China is very strong. Many of our new clients are seeking active business interests in Australia. Investment in property development, agriculture and wineries while at the top of many applicants lists is certainly not the be all and end all for many.

We met individuals with a vast array of business interests across a diverse range of sectors who were keen to build relationships in Australia and partner with the right businesses or contribute capital to new business ventures. In this century, the Asian century, the region in which we live will become home to most of the world’s middle class. The Asian region will be the world’s largest producer of goods and services and the largest consumer of them. While Australia has strongly embraced the resources boom and the benefits in recent times we must continue to build strong relationships with China and Asia generally to not only grow economically but to further build on the social and cultural ties in the region.

Don Lee, Luke Malone, Martin Zhao and Gavin Fernando are Directors of Fountainguard Prosperity’s Asian Business Desk team who provide a full range of accounting, financial and wealth management advice to the Chinese market.

 

Prosperity CEO appointed to LEA’s Global Board

Prosperity Advisers is a member of LEA Global / Leading Edge Alliance ranked by the International Accounting Bulletin as the second largest International firm association of independent accounting firms for 2014.

The LEA Global is an International alliance of independently owned accounting and consulting firms. Established in 1999, The LEA has more than 190 member firms worldwide with collective revenues of over 2.9 billion USD. Over 100 countries are represented by the association.

“By utilising technology, developing innovative special interest groups, and connecting internationally to the knowledge of our member firms, LEA Global members are able to compete on a substantial scale, throughout the country and across the globe,” stated Michael Davis, Managing Partner HW Fisher & Company, London and LEA Chair.

“LEA provides the resources that support their consistent growth and, subsequently, its own. The combined knowledge of the many top firms in LEA is shared across all firms, and contributes to the continuing success of each.

“When the idea for LEA was conceived, the plan was to introduce an independent association that helped firms compete with the Big Four. The competitive landscape changed since our inception in 1999 as other large national and regional firms emerged. Yet the continued growth of the Alliance is a testament to the independent successes of member firms and their ability to understand and proactively deal with new challenges. The appeal of an accomplished association that consistently meets the needs of its membership is indisputable,” said Gary Shamis, Managing Partner SS&G Financial Services, Inc. & LEA Chair Emeritus.

“Accounting has come out of the dark ages. The most successful firms operate as strategic businesses, and this view extends to its client base, centers of influence and the alliance it belongs to.  Over the past 14 years, LEA’s success has proven that the attention and support it provides to its members, including their overall operations special interest groups, has been a major factor in the success of its member firms.”

LEA Foundation firm, Prosperity Advisers Group CEO, Allan McKeown has recently been appointed to LEA’s Global Advisory Board.

Prosperity is a full-service accounting, business and financial advisory firm.  Prosperity has an East Coast footprint with offices in Sydney, Newcastle and Brisbane.

McKeown said “our firm’s membership has been invaluable in providing our clients with personal contacts and a global reach to assist with their International business expansion.”

 

Tax tips to consider before 30 June 2014

There is less than a month until the end of the financial year and following on from a very tough Federal Budget this is shaping up to be a very important year-end for tax planning.  This is largely thanks to the increase in tax rates we are likely to see next year from the proposed deficit levy. 

So in preparation for the changes coming, there are some important steps you can take, before the end of the financial year that will assist in reducing your tax payable when your 2014 returns are lodged and in the year beyond to 2015.

Here are a few, and you can see more in our downloadable tax preparation guide ‘113 Tax Tips‘.

 

Avoiding the Deficit Levy

The deficit levy, which is due to commence on 1 July 2014 is likely to impact individuals with a taxable income above $180,000 and is expected to last for 3 years (i.e. the 2014-15, 2015-16, and 2016-17 financial years).  Managing your tax affairs to minimize exposure to the levy is one of our most important tasks this year.

When combined with the 0.5% increase in the Medicare Levy from 1 July 2014, this represents a jump in the top marginal tax rate from 46.5% to 49%.

If you are already on the top marginal tax rate, then increasing your income this year with an offsetting reduction in next year’s income could save you 2.5% in tax on that amount. Strategies could include the following:

  • Choosing not to prepay expenses such as interest.
  • Bringing forward into 2013-14 any expected income from asset disposals via early sale.
  • Deciding not to delay income receipts (if this is a strategy you typically use).

You may also choose to make greater use of salary packaging in the next 10 months to reap the benefits. To match the personal tax increase, the FBT rate increases to 49% from 1 April 2015. Interestingly this means that there is a 2% benefit to packaging taxable fringe benefits for people on more than $180,000 between 1 July 2014 and 31 March 2015.

Changes to the rules around the purchase of depreciating business assets

In 2013 the Government foreshadowed changes to the ability of eligible small businesses to claim an  immediate deduction for expenditure on depreciating assets costing less than $6,500 (and the ability to claim $5,000 for motor vehicle purchases).

Whilst these changes have yet to be enacted they are intended to be retrospectively implemented from 1 January 2014, when the threshold will be reduced to $1,000.  So being aware of this is important in your tax planning process.

Superannuation contributions for the year ending 30 June 2014

Prior to year end it is also important not to forget about superannuation. You may consider any of the following strategies in looking over your superannuation:

  • Where appropriate, ensure that maximum concessional contributions are paid before 30 June. It is also critical that care is taken to not exceed the maximum contribution limits.
  • You may wish to give consideration to making non-concessional contributions to superannuation.
  • If you have a spouse, parent or child on a low income then consideration should also be given to making a non-concessional contribution for them and taking advantage of the government co-contribution.
  • If your superannuation fund is in pension phase then it is important to remember to make the minimum pension payments from your SMSF before 30 June 2014. This is discussed further below.

Understand your minimum Pension Payment requirements

It is worth noting that the pension drawdown relief provided by Government as a result of the downturn in the global financial markets ceased from the 2013-14 year. Minimum pension payment percentages have now reverted back to those last seen in the 2007-08 year.

While the table below provides further details, we recommend that you discuss your personal circumstances with your adviser before making the payment to ensure the correct amount is paid and to also ensure an appropriate buffer given changes.

Age                              Minimum

Under 65                               4%
65 to 74                                 5%
75 to 79                                 6%
80 to 84                                 7%
85 to 89                                 9%
90 to 94                                 11%
95 to whenever                    14%

 

Put in place appropriate trust distributions

As in previous years, if you operate a trust it is crucial that the trust resolves how it will distribute the income of the trust prior to 30 June 2014.

Other items

While there is various other year-end tax planning items that can be considered, it is not possible to provide a comprehensive list in an article such as this. Please discuss any items you wish to consider with your adviser or download our 113 Tax Tips for more insights that you can review in your own time.

Please note that our comments above are general in nature, and should not be relied upon without seeking further advice from your adviser.