How to Structure Family Office Investments for Australian Visas

In recent years, Australia has become an increasingly attractive destination for high-net-worth individuals (HNWIs) and families looking to secure a prosperous future through investment opportunities. One of the key mechanisms that allow these individuals and families to settle and thrive in Australia is the family office structure, which offers flexible and efficient means of managing investments for both wealth preservation and immigration purposes. This article will delve into how to structure family office investments for Australian visas, offering insights into the visa types, investment strategies, tax considerations, and practical steps that potential applicants should consider when planning their investment and migration journey.

Understanding the Family Office Concept

A family office is a private wealth management advisory firm that serves high-net-worth individuals or families. The primary goal of a family office is to centralize the management of investments, financial planning, and estate planning, among other services. Family offices can be broadly divided into two categories:

• Single-family offices (SFOs): Dedicated to managing the wealth of one family.
• Multi-family offices (MFOs): Serve several families, pooling resources and expertise to offer a broader range of services.

In the context of Australian visas, family offices are often structured to facilitate investment in Australia and enable HNWIs to secure the appropriate visa that grants residency or citizenship. These offices serve as a platform for managing not only investments but also the administrative aspects of visa applications, including ensuring compliance with Australian immigration laws.

Overview of Australian Visa Options for Investors

Australia offers several visa pathways for foreign investors, entrepreneurs, and high-net-worth individuals seeking to establish themselves in the country. The most relevant visa options for family offices looking to make investments in Australia include the Business Innovation and Investment (Permanent) visa (subclass 888), the Investor visa (subclass 891), and the Significant Investor visa (subclass 188).

1. Significant Investor Visa (SIV) – Subclass 188

The Significant Investor Visa is one of the most popular visa pathways for high-net-worth individuals seeking to move to Australia. The SIV is aimed at encouraging wealthy individuals to invest in Australia and contribute to the Australian economy. To qualify for this visa, applicants are required to make a complying investment of at least AUD 5 million in Australia. These investments must be spread across eligible assets, such as Australian government bonds, shares in Australian companies, real estate, or managed funds.

The key requirements for the SIV include:

• A minimum AUD 5 million investment in Australia.
• At least 40% of the investment in venture capital and private equity funds.
• An additional 60% in other eligible investments, including bonds, equities, or real estate.

The SIV allows for temporary residency for up to four years, with the possibility of applying for permanent residency after the visa holder satisfies certain residency requirements.

2. Investor Visa (Subclass 891)

This visa is for individuals who have held a temporary investor visa and wish to apply for permanent residency. Applicants must demonstrate that they have held a designated investment for at least four years and that they have met the Australian government’s investment conditions. Unlike the SIV, which has a specific investment requirement of AUD 5 million, the Investor Visa requires a lower investment threshold of AUD 1.5 million, but the focus is still on making substantial investments in Australia.

3. Business Innovation and Investment (Permanent) Visa – Subclass 888

The Subclass 888 visa is a permanent residency visa for those who have previously held a temporary subclass 188 visa under the Business Innovation and Investment Program. To apply for the Subclass 888 visa, applicants must demonstrate that they have successfully operated a business or managed their investments in Australia. This visa is particularly relevant for entrepreneurs and business owners who are keen to expand their ventures in Australia.

Structuring Family Office Investments for Australian Visas

When it comes to structuring family office investments for Australian visas, the primary objective is to ensure that the investment portfolio complies with the requirements outlined by Australian immigration laws while aligning with the family’s long-term wealth management goals. Structuring family office investments involves a blend of legal, financial, and regulatory considerations to ensure that the investments meet both visa requirements and broader financial objectives.

1. Investment Portfolio Design

For a family office seeking to obtain an Australian visa, the first step is to design an investment portfolio that meets the specific requirements of the relevant visa category. As noted, the SIV requires a minimum investment of AUD 5 million, with specific allocations in venture capital, private equity, and other eligible assets. The family office must ensure that the investments are spread across eligible sectors while considering the family’s risk tolerance and investment preferences.

In particular, the following investment strategies are commonly employed:

• Venture Capital and Private Equity: Investing in Australian start-ups or private companies with high growth potential can meet the SIV’s requirement of having 40% of the investment allocated to venture capital and private equity. These investments are typically higher risk but offer the potential for higher returns and long-term capital appreciation.
• Government Bonds: Allocating a portion of the investment in government bonds, which are considered low-risk, can help balance the overall portfolio. Australian government bonds are also eligible for SIV investments.
• Australian Equities: Investing in publicly traded companies listed on the Australian Stock Exchange (ASX) is another viable option. This allows the family office to gain exposure to a wide range of sectors, from finance and technology to energy and real estate.
• Real Estate: While real estate is generally not the primary focus of the SIV, it can still be a valuable part of the overall investment strategy. Residential and commercial properties in Australia can offer stable returns and long-term capital growth potential.

2. Tax Implications for Family Office Investments

When structuring family office investments for Australian visas, it is crucial to consider the tax implications, as Australia has a complex tax system. The tax treatment of investment income, capital gains, and other assets can impact the family office’s long-term returns and overall wealth management strategy.

• Capital Gains Tax (CGT): Australia levies CGT on the sale of certain assets, including shares and real estate. Family offices should consider the CGT implications when structuring their investments in Australia, particularly if they intend to liquidate investments at a later date. There may be exemptions available for assets held for more than a year, so understanding the timing of asset disposals is critical.
• Income Tax: Investment income, such as dividends from Australian companies or interest from government bonds, is subject to Australian income tax. The family office should work with tax advisors to understand how to minimize tax exposure through tax-efficient investments and appropriate tax planning strategies.
• Trust Structures: Many family offices use trusts to hold and manage investments, particularly in Australia’s high-net-worth context. Trusts can offer tax advantages, including flexibility in income distribution, asset protection, and succession planning. However, they also come with compliance obligations, so it’s important to seek legal and tax advice when establishing trusts.

3. Setting Up the Family Office in Australia

One of the key steps in structuring family office investments for Australian visas is setting up the family office itself. Establishing a family office in Australia not only enables HNWIs to manage their investments but also helps them navigate the visa process more effectively. Key considerations include:

• Choosing the Right Legal Structure: Family offices typically operate as private companies, partnerships, or trusts. The choice of legal structure depends on the family’s investment objectives, tax considerations, and legal requirements. A trust or private company structure may be more advantageous for managing large-scale investments and minimizing tax liabilities.
• Compliance with Australian Regulations: Family offices in Australia must comply with a range of regulatory requirements, including those set out by the Australian Securities and Investments Commission (ASIC) and the Australian Taxation Office (ATO). Family offices must ensure that their investments are compliant with Australian laws and that they meet the relevant visa requirements.
• Hiring Professional Advisors: Establishing a family office in Australia often requires engaging a range of professional advisors, including legal counsel, tax advisors, investment managers, and business consultants. These professionals can help ensure that the family office operates efficiently and in compliance with Australian regulations.

4. Residence and Reporting Requirements

In addition to making qualifying investments, visa applicants must fulfill the residence and reporting requirements of the relevant Australian visa. For the Significant Investor Visa (subclass 188), applicants must live in Australia for a minimum of 40 days per year over the life of the visa. This residency requirement ensures that applicants are genuinely engaged in the Australian economy and are actively managing their investments.

Family offices should be mindful of the reporting obligations, which may include providing annual statements about the investments made, their performance, and how the family office complies with Australian immigration requirements.

Practical Steps for Structuring Family Office Investments

• Consult with Immigration Experts: Family offices looking to apply for Australian visas should engage with immigration consultants who specialize in investment visas. These experts can provide tailored advice on visa requirements, help navigate the application process, and ensure that the family office’s investments meet the required thresholds.
• Work with Tax Advisors: A tax advisor familiar with Australian taxation laws will be essential in structuring investments in the most tax-efficient manner. This includes advising on capital gains tax, income tax, and possible tax benefits through trust structures or other investment vehicles.
• Diversify Investments: To comply with the SIV requirements and ensure long-term financial stability, family offices should aim for a diversified investment portfolio. This helps balance risk and reward while positioning the family for future growth.
• Focus on Long-Term Growth: Family offices should adopt a long-term investment strategy that aligns with both the Australian visa requirements and the family’s broader wealth management objectives.

Conclusion

Structuring family office investments for Australian visas is a multifaceted process that requires careful planning, compliance with legal and immigration requirements, and strategic financial management. By choosing the right investment vehicles, understanding tax implications, and working with professional advisors, high-net-worth families can successfully navigate the process of obtaining an Australian visa while also preserving and growing their wealth. For more information on the relevant visa programs and investment opportunities, prospective applicants should consult with Australian immigration and financial experts to ensure that they meet all the requirements and position themselves for success in Australia.