Australian Business and Investment Visas: What They Are and Common Mistakes
The subclass 188 Business and Investment visa is a four-year provisional visa for those seeking to manage a new or existing business in Australia or invest in an Australian state or territory. It is an attractive option for those with business and investment skills and provides a pathway to permanent residency under 3 distinct streams. Each stream contains its own criteria and the stream under which you apply will depend on a variety of factors such as your business and investment history, your intentions in Australia and the funds that you are willing to invest.
All streams require a nomination from a state or territory government which is based on the information you provide through your Expression of Interest (EOI). The EOI is not itself a visa application, but rather a method of demonstrating how you meet the criteria for the particular visa. The relevant government will issue an invitation to apply for the visa based on this information which must then be substantiated by submitting all supporting documents and information.
3 main streams of the Australian Business and Investment visa are:
- Business Innovation
- Investor
- Significant Investor
Australian Business Innovation Stream (Subclass 188) visa
The business innovation stream is designed for those who are seeking to establish a new or develop an existing business in Australia. The key criteria of this stream are the revenue and asset requirements as well as the need to demonstrate your successful business career.
The Department will assess your commitment to establish or participate in an existing business in Australia and your intention to maintain a substantial ownership interest. In doing so, you should demonstrate how you will maintain a direct and continuous involvement in the management of the business and your overall responsibility for the day-to-day decision-making to influence the company’s direction and performance.
Common mistakes when apllying 188 visa (innovation stream)
The most common mistakes for the Business Innovation stream of the subclass 188 visa are:
1.Failure to demonstrate a direct and continuous involvement in managing the business
Business owners are required to evidence their direct and continuous involvement in the management of the business, to affect both its overall direction and performance. The Department will consider the size and scope of the business when assessing your level of involvement in its management and how much of this responsibility is shared. It is important to articulate the level of control you exercise over the company’s resources and your involvement in the day-to-day decision making.
2. Failure to provide adequate explanation for previous losses
A net loss does not automatically result in refusal, but it does need to be adequately justified in order to meet the ‘successful business career’ requirements. The key factor that will be considered is whether the loss was incurred as a result of poor business acumen or management decisions. You would not fail this criterion if the loss arose from legitimate business decisions that resulted in the increased equity in the business, or had the potential to increase profitability, market share, business growth or provide a competitive advantage.
3. Annual turnover less than the required minimum
The Department require that one or both of your main businesses had an annual turnover of at least AUD 500,000 for 2 of the 4 fiscal years immediately before the time of invitation to apply for the visa. You must ensure that you calculate this in the Australian dollar using an approved currency conversion website.
Australian Business Investor Stream (Subclass 188) visa
The Investor stream of the subclass 188 visa is for those who wish to make a designated investment of AUD 1.5 million into an Australian state or territory with verifiable experience in directly managing an eligible investment or qualifying business. The main and most difficult criteria of this visa is the requirement to demonstrate a high level of management skill, as well as meeting the net personal and business asset threshold.
Although a subjective assessment, the Department will assess the level of skill you have exercised in managing your eligible investments, essentially requiring that you have actively managed such assets. This means that this criterion would not be considered satisfied if the majority of your assets had been passively retained or there was no evidence of active evaluation or regularly monitoring performance.
It is crucial therefore that you adequately detail the active management of your eligible investments for at least 1 of the 5 fiscal years immediately preceding the visa application.
Common mistakes when applying for 188 visa (Investor stream)
The most common mistakes for the Investor stream of the subclass 188 visa are:
- Insufficient evidence of management skill
One of the most common reasons for refusal is that the applicant has not demonstrated a sufficiently high level of management skill. To meet this criterion, you must demonstrate that you have exercised responsibility in making the key decisions regarding the evaluation, selection, purchase and sale of the investments. You should provide a detailed resume and written statement to corroborate the management of your investments which should adequately explain your evaluation methods and decision-making process of buying, selling or retaining an asset.
2.Inactive management of long term investments
While certain assets may be viewed as long term investments, requiring little to no active management, you must still demonstrate a high level of management skill for this aspect of your portfolio. This may be overcome by sufficiently justifying that the decision to retain the asset was based on an evaluation of factors such as the market for that particular asset and the composition of your investment portfolio.
It is important to demonstrate active and continuous evaluation of the asset’s performance in order to justify it as a sound investment for the purposes of your portfolio. The key is to emphasise your active management and decision-making process behind the investments.
Australia Significant Investor stream (subclass 188) visa
The Significant Investor stream of the subclass 188 visa is for those willing to make a AUD 5 million investment and have a genuine intention to maintain that investment for at least 4 years. The investment must be a complying significant investment, meaning the 5 million must be invested in specific proportions across Australian venture capital and growth private equity funds, eligible managed funds that invest in emerging companies and in managed funds which invest in a combination of Australian listed securities, corporate bonds or notes, annuities and real estate.
The Significant Investor stream does not require you to demonstrate a direct involvement in managing the investment, only that you have made and hold the investment at or before the time a decision is made on the application.
Common mistakes for 188 visa (Significant Investor stream)
The most common mistake for the Significant Investor stream of the subclass 188 visa is:
- Failing to sufficiently establish the source of funds for investment
The legislation requires that the funds used to make the investment are unencumbered and lawfully acquired. The Department must be satisfied that the assets nominated to fund the investment were accumulated legally and may request additional evidence to determine the source of funds. Applicants under the Significant Investor stream are commonly requested to provide additional documentation in order to trace the investment funds back to legitimate business and investment activities.
The types of documentation will vary depending on a variety of factors such as the source of funds and your country of origin. It is important to sufficiently evidence the source of your investment funds as the Department must be properly satisfied that you are the owner of the funds and that they were lawfully acquired.
The Business and Investment visas are some of the most heavily scrutinised and rigorously assessed visa types under Australian migration law, making it all the more important to avoid common yet avoidable mistakes. If you are intending to lodge a visa under one of these streams or believe that you may be eligible, please contact No Borders Law Group and speak with one of our migration lawyers.
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