Presentation on theme: "Investing in Australia Australia-China Trade & Investment Beijing| September 2013."— Presentation transcript:
Investing in Australia Australia-China Trade & Investment Beijing| September 2013
2 Overview Significant investor visa migration Significant investor visa classes of investments Where are the opportunities? Indirectly investing in property Investing in private equity Investing in managed funds Tax issues for Chinese investors How Sparke Helmore can help
3 New Visa Class Residence period Visa requirements Visa funds A new visa class for investors investing $5 million into a complying investment for four years Subclass 188 (Provisional) and Subclass 888 (Permanent) 160 days residence period over four years Duration of stays is at discretion of investor No English language tests, no points tests, no age limits Health and character tests only Funds for investment must be lawfully acquired Once visa is processed, applicants are invited to invest into complying investments – the four year period starts from then Significant investor visa migration
5 Property Private equity Managed funds Prime grade industrial assets Retail assets Off the plan residential apartments $800K Health and aged care services Consumer and retail businesses Agriculture Property funds – AREITS Hedge funds – alternative assets, lower leverage Fund of funds – equities and international equities Where are the opportunities ?
7 Foreign Investment Review Board SIV migration criteria Tax and stamp duty Available investment structures Financing and security Foreign investment review, notification and approval required Existing residential property not permitted (except for redevelopment) Direct property ownership is not permitted Property may be owned only through a regulated managed fund (i.e. a fund that has an Australian Financial Services Licence) Upfront tax planning is essential Stamp duty applies differently in each state and territory Units in a unit trust (which is a regulated managed fund) Interest in a syndicate (which is a regulated managed fund) Shares in a property development company Loan to value ratios are typically 60% to 70% Bank will take security which is registered on the National Personal Properties Securities Register Investing in property: key issues
8 Typical property investment structure Joint venture agreement Development agreement Investor Fund Property Development partner Development company Investors may invest in property via a fund or development company
10 Qualifying business New business Ownership interest Not speculative or passive Must be operated for the purpose of making a profit Must provide goods or services to the public (other than the provision of rental property) New business is permitted – must be a genuine attempt to establish and maintain a qualifying business Need to demonstrate a business plan, budget, market research and the undertaking of business activities Ownership interest requires an equity interest (i.e. shares) May be owned via a wholly owned company or trust Must not be operated primarily or substantially for the purpose of passive or speculative investment The purchase of an asset for the sole purpose of making a capital gain is considered speculative Investing in Private Companies: key issues
11 Case study: private equity investment structure shareholders agreement 39.5% George Institute Investor(s)* Affordable Medicines Limited (AML) shares 60.5% The George Institute (GI) is an Australian leading global health research institute GI is currently commercialising a cardiovascular polypill for the Asian market Investors acquire shares in AML and enter into a shareholders agreement with GI Exit strategy may be a partial sell down and financing, 100% trade sale or IPO in five to seven years
12 Case study: private equity investment structure cont. Exchangeable, redeemable preference securities Exchanges into shares in JETGO Airlines on IPO Investor(s)* JETGO AUSTRALIA AIRLINES JETGO AUSTRALIA HOLDINGS 100% subsidiary JETGO Australia Holdings operates a private fly-in fly-out charter service for mining companies and corporates. JETGO plans to establish a subsidiary Australian regional public airline company. Investors acquire an exchangeable security in JETGO Australia Holdings. Upon an IPO of JETGO Australia Airlines, this security is exchanged for shares in JETGO Australia Airlines.
14 What is a regulated managed fund ? Trust deed Unit trust Investor Assets Trustee Units Trustee is a fiduciary Trustee must have an Australian Financial Services Licence Trustee is governed by Australian Securities & Investments Commission Trust deed governs the relationship between trustee and investors $ $ Assets may be: infrastructure property government bonds listed equities cash instruments mortgages, and other managed funds.
15 ASIC - regulated Governing arrangements Structure of investment Investment is at risk (unless capital protected) The trustee of the fund must have an Australian Financial Services Licence (AFSL), which authorises them to operate the fund. Information about the trustees AFSL can be found on the Australian Securities & Investment Commissions website at www.asic.gov.au. www.asic.gov.au The terms of the investment are governed by the trust deed and the representations made by the trustee in any disclosure document, for example, the information memorandum or product disclosure statement. An investment in a managed fund is generally an investment in units in a unit trust. The investor has a beneficial interest in the income and capital of the trust, but generally has no interest in the underlying assets of the fund, unless the trust deed provides the investor with any such specific rights vis-a-vis the trustee. The fund manager will generally represent that the fund will target a particular return for the investment. However, there is no guarantee that the return will be achieved or that capital will be returned, unless capital protection is offered. Investing in regulated managed funds: key issues
16 Case study: managed fund investment Perpetual Trustees Limited (Trustee) Investor(s)* Bond fund Equities fund International equities fund Managed fund Perpetual operates a fund of funds model Perpetual must manage the funds in accordance with its AFSL conditions the Corporations Act 2001 and the trust deed. Investors acquire units in a unit trust Investors can redeem their units at any time (may be subject to withdrawal fee) *Wholesale investors only (s761 (7) Corporations Act 2001 (Cth))
17 Australian tax issues are complex Tax residency Companies and trusts may be taxed differently CGT/ withholding tax Stamp duty Tax advice is essential Significant tax leakage could arise where double taxation occurs Investors may be an Australian resident, temporary resident or non-resident for tax purposes, depending on their profile Tax residency is a question of fact and degree There may be advantages to structuring the holding of complying investments through companies or trusts Tax residency of the company or trust must be ascertained if management and control is outside Australia Foreign investors acquiring Australian assets do not receive the 50% CGT discount Foreign investors should obtain advice about withholding tax Foreign investors should obtain advice about the stamp duty implications of their Australian investments Stamp duty applies differently in each state and territory Tax issues for Chinese investors
18 How Sparke Helmore helps One stop shop Visa processing Tax advice Investment structuring Investment management Tax advice Investment structuring Investment management SIV migration Visa eligibility and application Tax residency and tax on investments Investment vehicle and structure Ongoing advice - investment management
19 Corporate mid-market specialty The Australian Growth Company Awards celebrate excellence in the mid-market. They recognise companies that evidence high rates of growth, as well as innovation, integrity, contribution to community and sustainable growth. Award partners are Sparke Helmore Lawyers, Deloitte, Macquarie, MYOB, Australian Venture Capital Association (AVCAL) and Westpac Institutional Bank. Private Equity Media is the media sponsor. Sparke Helmore is delighted to be recognised as a Corporate Partner of AVCAL, the Australian Private Equity & Venture Capital Association for 2013/14. The 2013 Australian chapter in Getting the Deal Through - Corporate Governance, LB Research, is co-written by Hal Lloyd, Nick Humphrey and Michelle Segaert. This publication provides detailed analysis of key areas of law and policy for over 150 jurisdictions worldwide. Leading international firms and regional specialists contribute to the publication. Australian Private Equity Handbook, written by Nick Humphrey and published by CCH Australia in 2012, is a plain English reference guide with step-by-step advice on implementing private equity transactions. It provides practical and up-to-date instructions on: term sheets, shareholder arrangements, acquiring the target and conducting due diligence. This comprehensive text also includes specialist chapters on equity funding, distressed buyouts and preparing for exit.
21 Important information This document has been prepared by Sparke Helmore for information purposes only. This document provides general factual information only, is not financial advice nor does it provide any recommendation to invest. No representation or warranty is given or implied as to the accuracy, completeness or reliability of any statements or opinions in this document (any of which may change without notice).