Government initiatives to further boost inward investment

Prosperity Fountainguard Advisers welcomes the Federal Government initiatives announced under the Industry and Competitiveness Agenda that will expand the Investor Visa Programme.

The Government will reform the programme to encourage more high net worth individuals to make Australia home and to better direct additional foreign investment, while maintaining safeguards to ensure the migration programme is not misused. The changes to the programme will:

  • streamline and enhance visa processing, further promoting the programme globally and strengthening integrity measures, to both increase the attractiveness of investing and settling in Australia while ensuring Australia’s interests are protected;
  • align the criteria for complying investments with the Government’s national investment priorities. The investment eligibility criteria will be determined by Austrade in consultation with key economic and industry portfolios;
  • introduce a Premium Investor visa (PIV), offering a more expeditious, 12 month pathway to permanent residency than the SIV, for those meeting a $15 million threshold;
  • and task Austrade to become a nominating entity for SIV (complementing the current State and Territory government’s’ role as nominators) and to be the sole nominating entity for PIV.

We led a nine city investor roadshow throughout China in June, and saw that although there is strong interest in Australia as an immigration and investment destination, and there is a reasonable pipeline of SIV applications, we face strong competition from other jurisdictions. Recent changes in NSW have made this State more attractive with the removal of the need to invest $1.5m in Waratah Bonds recently removed and the Commonwealth measures will only assist to further attract high wealth investors in the future.

Discussions with potential investors in China revealed certainty and clarity of the process were issues that are front of mind for potential SIV applicants when considering which country to pursue.  While the initial detail is scant, it appears the initiatives proposed will assist on those fronts. There is uncertainty in other countries SIV programs at the moment and the Government’s focus to enhance the scheme and encourage investment in the right areas as well as remove red tape will continue to make Australia an attractive destination.

Prosperity Fountainguard have a second investor delegation en route to Shanghai at the moment and they will present to over 20 potential investors in the higher net wealth category who are looking to invest $20m plus in Australia.  The proposed Premium Investor Visa will no doubt assist that group with their decision making and the revised program commencing in 2015 that allows an applicant to gain residency after twelve months is likely to be highly attractive.

We are eager to understand the detail of the new investment eligibility criteria.  These are no doubt designed to temper some of the strong interest in property development.  However, if the measures are too prescriptive, it may serve to stifle investor inflows or move them away from areas that Chinese investors are typically attracted to.

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.

 

Fountainguard – Prosperity Advisers joint venture to build inroads to Chinese market

Continued investment to drive future growth of the Asia Business Desk

Leading East Coast chartered accounting and financial advisory firm Prosperity Advisers Group has bolstered its Asia Business desk expertise by partnering with Fountainguard Pty Ltd to increase its advisory capabilities to the Chinese market.

The joint venture enables Prosperity Advisers to grow and consolidate its established expertise providing a full range of accounting, financial and management advisory services with a sharp focus on the Chinese market. Prosperity has 25 years’ experience and has a history of success working with the Asian market facilitating investment between Asia and Australia. As China’s economy continues its growth, the joint venture positions Prosperity to facilitate local participation in that growth.

Martin Zhao and Don Lee, Chinese ex-pats with banking and commercial backgrounds are principals of the joint venture and will bridge a cultural gap ensuring clients receive a seamless experience. Prosperity will lead a six-person team that will visit five key cities in China next month to meet with clients and key influencers and introduce the venture.

Allan McKeown, CEO Prosperity Advisers says, “Prosperity’s growth in its Asia Business desk continues apace and the joint venture with Fountainguard is an important strategic development. Through our global advisory network, Leading Edge Alliance, we have built strong relationships with Chinese clients investing in Australian assets, and helped Australians enter the Asian market. This partnership underscores our commitment to growing our Asia Business Desk and providing a blue-chip service.’’

Martin Zhao says, “The Chinese investment market is notoriously difficult to enter and Don and I were impressed with Prosperity’s success and approach. The partnership between Fountainguard and Prosperity will enable Allan and his team to really build upon their existing relationships and create multiple opportunities for clients; we are excited to be working with a progressive advisory firm to build their capabilities in China.”

“The relationship with Fountainguard is a key differentiator for Prosperity Advisers. While we regularly visit China and have personal relationships with our Leading Edge Alliance partners there, we believe we are amongst the first financial advisers to secure a strategic partnership to directly build a Mandarin-speaking on the ground presence with the Chinese market.

“Our Asian based clients have invested tens of millions of dollars into Australia and will continue to do so in the future. These investments have included property, resources and active businesses. The significant ‘Investor Visa’ market has enormous untapped potential.”