Investing in AustraliaAustralia-China Trade & Investment

Beijing| September 2013

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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

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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

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SIV classes of investments

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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 ?

Indirect investment in property

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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

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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

Investing in private equity

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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

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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

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Case study: private equity investment structure cont.

Exchangeable, redeemable preference securities

Exchanges into shares in JETGO Airlines on IPO

Investor(s)*

JETGOAUSTRALIA 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.

Investing in regulated managed funds

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What is a regulated managed fund ?

Trust deedUnit 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.

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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 trustee’s AFSL can be found on the Australian Securities & Investment Commission’s website at 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

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Case study: managed fund investment

Perpetual Trustees Limited (Trustee)

Investor(s)*

Bond fundEquities fundInternational 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))

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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

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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

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Corporate mid-market specialty

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Sparke Helmore Lawyers

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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).