Making a “Designated Investment” is a requirement to be satisfied prior to the granting of a visa under the Investor stream of subclass 188, and the subclass 405 Investor Retirement visa.
A Designated Investment is an interest bearing Bond with a 4 year investment term, issued by the Treasury of the State or Territory Government in Australia which has sponsored the visa application.
Subclass 188 visa holders under the Investor stream progress to permanent residency under the Investor stream of subclass 888 once (amongst other requirements) the Designated Investment has reached maturity.
Subclass 405 visa holders do not have a direct pathway to permanent residency, and typically renew their 405 visa prior to the expiry of the presently held 405 visa, with a reduced Designated Investment amount when progressing from an initial 405 visa to a renewal (see below for the amount of the DI).
Interest on the DI is typically paid every 6 months, and from a tax planning perspective it is generally good practice for the DI to be owned by the visa applicant and his/her partner or spouse so the interest is split between the two individuals.
Continuing on the tax theme briefly, it should be remembered that the holder of a visa under subclass 188 or 405 is likely to be a “temporary tax resident” of Australia, and as such it may be – subject to the structuring of the visa holder’s investment assets – that the only income that is taxable in Australia is interest on the Designated Investment.
With a tax free threshold in Australia of A$18,200 there may be little or no tax to pay in Australia – particularly while interest rates on monies deposited are relatively low.
Interest paid on the DI while the visa holder is a tax resident of a country with which Australia has a Tax Treaty (eg the UK) is subject to a withholding tax of 10%.
The interest income may also be subject to income tax in the country in which the individual is a tax resident, with a tax credit available in respect of the 10% withheld in Australia to offset against the local income tax liability.
To review and plan your tax position we invite you to contact GM Tax.
The amount of the DI depends on the visa subclass under which you are applying, and (in the case of a subclass 405 visa) where you will be living and whether you applying for a first visa, or a renewal of a previous subclass 405 visa:
- Subclass 188, Investor stream – A$1.5m
- Subclass 405, Investor stream – Initial visa application – Metro area – A$750k
- Subclass 405, Investor stream – Initial visa application – Regional/low growth area (as defined) – A$500k
- Subclass 405, Investor stream – Renewal visa application – Metro area – A$500k
- Subclass 405, Investor stream – Renewal visa application – Regional/low growth area (as defined) – A$250k
The DI is requested by the Department of Immigration immediately prior to the granting of the visa, and is confirmed by the stamping of a form 1031, after the investment has been made by the visa applicant.
Upon receipt of the form 1031 by the Department of Immigration case officer the visa is granted.
The procedures for the making of the DI vary between the States and Territories, and once the request to make the DI is received from the Department of Immigration it is recommended that contact is made with the relevant Treasury to confirm the steps to be taken.
A link to each State and Territory Government Treasury is here:
Sponsorship under the Investor stream of subclass 188, and for the grant of a visa under subclass 405 is not available from the ACT.
For the transfer of funds to Australia from the UK and the USA Go Matilda Visas is pleased to recommend specialist currency transfer firm Moneycorp.
