Migration (Complying Investments) Instrument 2025

The instrument rests on a few recurring structural concepts that determine what investments qualify and how compliance is demonstrated.

1. Composition requirements. The principal concept is mandatory allocation of the total required investment across three labelled buckets: venture capital funds (minimum 20 per cent; section 7(1)(a) and section 9), emerging companies investments (minimum 30 per cent; section 7(1)(b) and section 10), and balancing investments (permitted but subject to section 11). Any remainder can be distributed across these three (section 7(2)). For some legacy applicants there are fixed dollar minima applying to the venture capital and emerging companies components (section 7(3)).

2. Investment vehicle architecture. The instrument requires that the emerging companies and balancing components be invested through managed investment funds (sections 10(2) and 11(2)(a)-(b)). Venture capital exposure is to be via specified venture capital funds as defined by the Venture Capital Act 2002 (section 4, definition of venture capital fund and section 9). Fund of funds and investor directed portfolio services are permitted provided the underlying funds comply (definition of fund of funds in section 4 and s12(11)).

3. Custody and escrow mechanics. Where commitments to venture capital funds are required, the investor must enter agreements with general partners, and amounts must be held in escrow in favour of the general partner or secured by a guarantee from an Australian ADI (section 9(2)(b)). At decision time at least 20 per cent of the total investment must be held in escrow/guarantee or on deposit in a cash management trust or Australian ADI (section 9(3)). These mechanics set an operational custody model rather than an immediate deployment requirement.

4. Manager and issuer qualification. Persons issuing the interests in the funds or authorised to manage them must hold, or be otherwise covered by, an Australian financial services licence or be exempt (section 12(2)). Central management and control of these entities must be in Australia (section 12(4)). Further, specified persons managing the funds must maintain a minimum of AUD 100,000,000 in funds under management in Australia where the investment is made through certain vehicles (section 12(6)).

5. Asset and concentration limits. The emerging companies and balancing fund rules set quantitative ceilings and floors to shape exposure: market capitalisation test (< AUD 500,000,000 at time of first investment for issuers; section 10(6)(a)); a rule that no more than 30 per cent of a managed fund’s net assets can comprise issuers whose market capitalisation has grown to AUD 500,000,000 or more since first investment (section 10(6)(b)); issuer concentration limits (no more than 10% in securities of any single issuer post-investment; section 10(11)); minimum issuer diversity (securities from 20 or more issuers within three months; section 10(10)); caps on foreign quoted securities (no more than 10% of fund net assets; section 10(9)); caps on Australian non-ASX quoted and unquoted Australian securities (20% each, sections 10(7)-(8)); cash limits for managed funds (20% of net assets; section 12(10)); and similar permitted asset lists for balancing investments (section 11(3)).

6. Prohibitions to avoid certain exposures. The instrument excludes securities issued by governments and debentures from being emerging companies investments (section 10(5)(a)-(b)). It forbids direct residential real property investments through managed funds and restricts other residential exposures and investments motivated to procure residence for the investor or family unit (section 12(7)-(8)). Derivatives are limited to risk management and are not to be speculative or used to materially eliminate exposure to the market price movements of emerging companies investments (section 12(9)).

7. Compliance and remedial mechanics. The instrument imposes an allowable non-compliance period for limited breaches of section 10 or the cash holding rule in subsection 12(10) of up to 10 business days (section 13). It provides reinvestment rules where an investment is realised or reimbursed while the visa is in effect (section 9(5)-(7)).

8. Cross-referenced legal scaffolding. Numerous definitions and regulatory constraints are imported from other laws and instruments, notably the Corporations Act 2001 (definitions of ADI, managed investment scheme, member of the family unit via the Regulations), Venture Capital Act 2002 (definition of venture capital fund), Income Tax Assessment Act 1997 (cash management trust), Life Insurance Act 1995 (approved benefit funds), and the Migration Regulations 1994 (investor and other visa criteria). The instrument therefore operates as a rulebook within a larger statute-based architecture (see section 4 and various cross-references).

Understanding these concepts is necessary to operationalise compliance: they determine which legal entities can manage funds, what assets can be held, how assets must be held or evidenced at decision time, and the quantitative caps and timelines that constrain portfolio construction.

Primary direct parties

• Prospective Subclass 188 visa applicants in the Significant Investor Stream, Significant Investor Extension Stream and the Investor Stream, and applicants for Subclass 888 visas who were previously invited to apply for Subclass 188 before 1 July 2021, insofar as those visas require complying significant investments under regulation 5.19C of the Migration Regulations 1994. The definitions of visa and investor appear in section 4 and section 6 notes; the instrument explicitly ties its requirements to regulation 5.19C (section 6).

• Fund general partners, trustees, responsible entities, issuers of listed investment company shares or life insurance product issuers who accept funds from these visa applicants. These persons are regulated by the instrument through licence and central management requirements (section 12(2)-(4)) and through the funds-under-management threshold in section 12(6).

• Australian authorised deposit-taking institutions, which can be required to provide guarantees or hold deposits on behalf of investors as security for venture capital commitments (sections 9(2)(b) and 9(3)(b)-(3A)(b)) and which are the permitted custodians for the on-deposit option at decision time (section 9(3)(b)).

Secondary or consequentially affected parties

• Managed investment funds and their managers that target emerging companies or balancing investment mandates. The instrument imposes market capitalisation, concentration, diversification, and issuer-origin tests (section 10), and cash limits (section 12(10)), which will influence fund design and eligibility to accept SIV/Investor Stream investor money.

• Venture capital funds conditionally or unconditionally registered under the Venture Capital Act 2002. The instrument permits investments in such funds subject to conditional registration rules and contains special reinvestment requirements where conditional registration lapses (section 9(6)-(7)).

• Auditors and compliance consultants, because the instrument requires annual audits for the emerging companies and balancing investment components from financial year 2021-22 (sections 10(12) and 11(4)). Auditors will be required to certify compliance with the instrument’s quantitative constraints.

• Australian financial services licence holders and licensing intermediaries. Issuers, responsible entities or authorised managers must either hold an AFS licence or be exempt (section 12(2)). This affects who can lawfully receive and manage investor funds under this framework.

• Investors’ close associates. The instrument disqualifies the investor, their spouse or de facto partner, and any associates from being the issuer or being involved in management or control of the issuer (section 12(5)). This restricts use of family-controlled entities or self-managed structures for complying investments.

Institutional and market consequences

• Established managers with at least AUD 100 million of funds under management in Australia are advantaged relative to smaller managers, because section 12(6) requires that, in several vehicle types, the trustee, responsible entity or issuer maintain that quantum in funds under management in Australia.

• The Australian ADI sector and regulated fund management industry are central to compliance because escrow, guarantee, deposit and custody arrangements must involve these institutions (sections 9(2)(b), 9(3)(b), 12(10) and 12(11)). This shapes where investors place liquidity pending deployment.

Miscellaneous affected regulatory architecture

• Migration decision makers and case officers, because the instrument specifies what investments qualify but not the administrative decision process. The instrument notes that regulation 5.19C of the Regulations includes additional requirements (section 6 Note 1), so the administrative determination of complying significant investments involves both the Regulations and this instrument.

In short, the instrument directly constrains investor behaviour and the product design and operational parameters of funds that intend to accept such investor money. It places compliance duties on fund issuers and managers, sets custodial pathways that involve ADIs, and privileges entities with material operations and regulatory licences in Australia.

Key duties derive from composition, timing, manager qualifications and operational constraints. The instrument creates no new private rights of action in text; it instead sets legal requirements that determine whether an investment is a complying investment for the purposes of regulation 5.19C. The following are the principal duties and the operational choices they impose.

Duties on the investor

• Portfolio composition: The investor must allocate at least 20 per cent of the total investment to venture capital funds (section 7(1)(a)) and at least 30 per cent to emerging companies investments (section 7(1)(b)). Any remaining portion must be in venture capital, emerging companies, or balancing investments (section 7(2)). For certain legacy applicants there are further dollar minima (section 7(3)(c)-(d)).

• Timing of investment: Investments must be made on or after the time of application for the relevant visa (section 8). For venture capital funds, commitments must be entered into within a window from application to six months after visa grant (section 9(2)) or 12 months for certain applicants (section 9(2A)).

• Custody/holding requirement: At the time of decision, at least 20 per cent of the total investment must be held either in escrow/secured by ADI guarantee or on deposit in a cash management trust or with an Australian ADI (section 9(3)). For some legacy applicants the AUD 500,000 threshold applies (9(3A)).

• Reinvestment obligations: If a venture capital investment is realised before the visa ceases to have effect, the realised amount must be reinvested in venture capital funds, emerging companies investments, or balancing investments (section 9(5)). If a conditional registration lapses and the investment is reimbursed because of that lapse, the reimbursed amount must be reinvested in another venture capital fund (section 9(6)-(7)).

• Compliance with managed fund limits: Emerging companies and balancing investments must be held through a managed investment fund that complies with market capitalisation, issuer concentration, diversification, foreign exposure and other limits (section 10 and section 11).

Duties on issuers, managers and custodians

• Licensing: The issuer or person authorised to manage investments must hold, or be covered by, an Australian financial services licence or be exempt (section 12(2)-(3)).

• Australian-based control: Central management and control of the issuer/manager must be in Australia (section 12(4)).

• Funds under management: For certain vehicle types, the trustee, responsible entity or issuer must maintain at least AUD 100,000,000 in funds under management in Australia (section 12(6)).

• Audit: Annual audits are required for the emerging companies and balancing investment components beginning from financial year 2021-22 (sections 10(12) and 11(4)).

Operational duties and constraints

• No direct residential property: Managed investment funds cannot make direct investments in Australian residential real property (section 12(7)(a)); other residential real property exposures are tightly constrained and subject to purpose tests (section 12(7)(b)-(8)).

• Derivative restrictions: Derivatives are allowed only for risk management and not for speculative purposes nor to eliminate exposure to emerging companies investments (section 12(9)).

• Cash limits: No more than 20 per cent of a managed fund’s net assets may be in cash held by Australian ADIs (section 12(10)). Fund of funds and investor directed portfolio services may hold cash for limited periods (section 12(11)).

Rights and administrative interaction

• The instrument does not create new statutory entitlements outside the Migration Regulations framework. It defines what counts as a complying investment for purposes of regulation 5.19C (section 6). Whether an investor’s particular arrangements are accepted as complying will be an administrative determination by visa decision makers under the Migration Act/Regulations, subject to the broader legal review regimes that govern migration decisions. The instrument contains no express private enforcement mechanism; compliance manifests as a precondition for visa grant and for satisfying visa criteria.

• Allowable remedial period: There is a limited remedial right in practical effect, in that certain breaches of section 10 or the cash holding rule in 12(10) are excused for up to 10 business days while they are being remedied (section 13).

These duties impose both substantive investment allocation constraints and operational duties on managers, with compliance documented through escrow/guarantee arrangements, deposits, and annual audits.

The instrument itself does not set out penalty offences, pecuniary fines or criminal sanctions. Instead, it operates as a subordinate instrument under the Migration Regulations 1994 and prescribes conditions that an investment must meet to be a “complying investment” for the purposes of subregulation 5.19C(6) (section 6). Enforcement and consequence mechanisms therefore arise from the Migration Regulations and immigration decision-making where non-compliance affects visa grant, visa continuance, or the investor’s ability to meet visa conditions. The instrument’s provisions that are directly relevant for enforcement are the compliance thresholds, timing windows, reinvestment obligations and remedial periods; these are the facts decision makers will assess under the Regulations.

Relevant enforcement mechanics and consequences, as they arise from the instrument together with the Regulations, include:

• Administrative refusal or later adverse decisions. If an investor’s funds do not meet the requirements of this instrument at the relevant times specified in the Regulations and the instrument (e.g. timing and escrow at decision time, section 9(3); composition minimums, section 7(1)), a migration decision maker may determine the investment is not a complying significant investment under regulation 5.19C and refuse, revoke or otherwise decline to accept the investor’s claim for eligibility for grant or continuation of a visa. The instrument explicitly frames itself as setting the requirements for compliance with regulation 5.19C (section 6).

• Requirement to remediate or reallocate. The instrument specifies reinvestment duties if investments are realised or reimbursed while the visa is in effect, and an allowable non-compliance window of up to 10 business days for certain breaches (sections 9(5)-(7) and 13). Failure to remediate within that window may expose the investor to adverse administrative consequences under the Regulations.

• Reinvestment prescription following regulatory events. If a venture capital fund’s conditional registration lapses under the Venture Capital Act 2002 and the investor is reimbursed, the instrument requires reinvestment of that reimbursed amount into another venture capital fund while the visa is in effect (section 9(6)-(7)). Regulators and decision makers will require documentary proof of such reinvestment when assessing continuing compliance.

• Audit and reporting expectations. Annual audits for emerging companies and balancing investment components are mandated from financial year 2021-22 (sections 10(12) and 11(4)). Audits generate documentary evidence that decision makers may require to demonstrate that fund managers complied with the market capitalisation, issuer concentration, diversification and other rules. Non-compliance identified by auditors could be material to visa eligibility.

• Reliance on other regulatory regimes. The instrument requires AFS licences or exemptions for issuers and managers (section 12(2)), and minimum funds under management in Australia (section 12(6)). Breach of those obligations could expose issuers or managers to regulatory action under the Corporations Act or by ASIC, which in turn could affect the investor’s complying investment status.

Because the instrument does not itself prescribe criminal penalties, the practical enforcement levers are administrative migration outcomes, the regulatory powers of financial regulators over funds and managers, and the contractual enforcement of escrow and guarantee arrangements with ADIs and general partners. The decision that an investment fails to be a complying investment is a factual and legal determination under the Regulations; the instrument supplies the tests that decision makers must apply.

The instrument is explicitly embedded within a network of statutes and subordinate instruments. It incorporates or cross-references definitions, licence requirements and regulatory thresholds from primary legislation and established regimes. The main interaction points are as follows.

Migration Regulations and Migration Act

• The instrument is made under subregulation 5.19C(6) of the Migration Regulations 1994 (section 3). Section 6 of the instrument states that it sets the requirements for an investment to comply for the purposes of subregulation 5.19C(6) (section 6). The instrument therefore operates as a specification of what constitutes a complying significant investment for visa eligibility under the Migration Regulations. Any assessment of compliance is ultimately conducted in the migration decision-making framework governed by the Migration Act and the Regulations.

Corporations Act 2001

• Definitions and regulatory constructs are drawn from the Corporations Act. The instrument imports the meaning of Australian ADI and the definition of managed investment scheme from the Corporations Act (section 4). It also references the concept of associate within the meaning of the Corporations Act (section 12(5)), and the definition of a foreign company and incorporated in Australia (section 4). The instrument’s AFS licence requirement (section 12(2)) relates directly to the licensing regime in the Corporations Act (s 913B), meaning that the Corporations Act regime governs the legal capacity of issuers and managers to accept investor funds under the complying investment framework.

Venture Capital Act 2002

• The instrument’s definition of venture capital fund and the special rules dealing with conditional registration and reimbursements reference the Venture Capital Act (section 4 definition and section 9(6)-(7)). Where a fund is conditionally registered and lapses under section 13-10(3) of the Venture Capital Act 2002, the instrument prescribes reinvestment obligations when investors are reimbursed (section 9(6)-(7)). Thus the Venture Capital Act’s registration regime has direct operational consequences for investors under this instrument.

Income Tax Assessment Act 1997 and Life Insurance Act 1995

• The instrument references cash management trusts (Income Tax Assessment Act) as a permissible deposit vehicle at decision time (section 9(3)(b)(i)). It also allows certain managed investment products that may result in payments from approved benefit funds or statutory funds maintained under the Life Insurance Act 1995 to be treated as managed investment funds (definition of managed investment fund in section 4, paragraph (c)). These references import tax and life insurance concepts into the permissible investment universe.

Corporations Act market and securities definitions

• The instrument’s securities definition (section 4) and its distinction between quoted and unquoted securities rely on market definitions within the Corporations Act (for example, the Market concept in s 767A cited in section 4). This linkage shapes which securities count toward emerging companies investment allocations.

Regulatory compliance and licensing regimes

• The AFS licence requirement in section 12(2) ties fund issuers and managers to ASIC-regulated licensing and conduct obligations. The requirement that the central management and control of persons be in Australia (section 12(4)) intersects with corporate residence tests under the Corporations Act and tax law.

Operational contract law and escrow guarantees

• The escrow and ADI guarantee mechanics (section 9(2)(b) and 9(3)) involve private contractual arrangements governed by general contract and banking law. The enforceability of escrow or guarantee arrangements will be determined by general legal principles under contract and property law.

Interaction with state and property law

• The instrument’s restrictions on Australian residential real property investments (section 12(7)-(8)) interact with state land law, planning and zoning regimes because the instrument references Australian land zoned for residential use and prohibits direct investments through the fund. The instrument also contains purpose-based tests that look to whether investments are made to assist the investor or family unit to reside in or gain legal ownership of residential real property (section 12(8)).

Administrative law and review

• The instrument prescribes substantive requirements for compliance with regulation 5.19C but does not itself set out merits or judicial review mechanisms. Disputes about whether an investor’s investments meet the instrument’s tests will be resolved in administrative decision-making under the Migration Act and are subject to the administrative and judicial review pathways that govern migration decisions. The instrument does not modify those pathways, but it defines the facts decision makers must apply.

Overall, the instrument must be read and operationalised alongside the Corporations Act (licensing, managed scheme law and market definitions), the Venture Capital Act (registration and conditional registration consequences), tax and insurance statute concepts, and the Migration Regulations. Compliance therefore requires simultaneous alignment with financial services, corporate, property, and migration regulatory regimes.

This instrument is self-contained as made on 26 September 2025 and commences 1 October 2025 (sections 1-2). It expressly repeals the earlier Migration (IMMI 15/100: Complying Investments) Instrument 2015 in full (Schedule 1). The Schedule effect is to remove that prior instrument entirely and replace it with the 2025 text. There are no other amendment entries or transitional provisions within the text provided.

Notable internal chronologies and vestigial references

• The instrument contains audit commencement dates that pre-date its commencement. Sections 10(12) and 11(4) require annual audits "Beginning financial year 2021-22" for the emerging companies and balancing investment components respectively. Those audit commencement references are embedded in the operative paragraphs, despite the instrument beginning to operate in 2025 (section 2). The instrument does not explain within its text whether those earlier audit dates are corrective, transitional, or simply retained from the prior instrument. Practitioners should note the anomaly and expect that operational audit obligations are in force for the stated components for financial years from 2021-22 onwards, subject to how the regulator applies the instrument.

• Transitional/legacy applicant provisions. The instrument contains special provisions for applicants who were invited to apply for a Subclass 188 visa before 1 July 2021 and for applicants who applied for a Subclass 888 visa after being invited before 1 July 2021 (section 7(3) and sections 9(2A) and 9(3A)). These provisions provide extended time (12 months after visa grant instead of 6 months) and specific dollar minima (AUD 500,000) for the venture capital component, and a specified AUD 1,500,000 threshold for emerging companies investments. These clauses operate as transitional grandfathering for pre-1 July 2021 applicants, and they remain present in the operative text rather than as a separate transitional schedule.

• Repeal of prior instrument. The Schedule 1 repeal is an unqualified repeal of the 2015 instrument. No other amendments or savings provisions are contained in the text beyond the limited application clauses described.

No other historical amendments are recorded in the instrument text provided. For full amendment chronology prior to or after this instrument, practitioners must consult the Federal Register of Legislation and relevant legislative history records, because the instrument itself only indicates the 2015 instrument is repealed and replaces it with the 2025 text.

The instrument text does not contain any litigation history, citations to judicial decisions, or references to case law. It does not name any cases. Consequently, there is no instrument-internal record of challenges, judicial interpretation or precedent.

Potential areas where litigation or judicial review could arise, based on the instrument’s provisions

• Interpretation of prescribed terms and undefined standards. The instrument uses terms such as "substantial part" (section 9(4)), "dominant purpose" (section 12(7)(b)(ii)-(iii) and section 12(8)), and creates reinvestment obligations triggered by factual events such as reimbursement following lapse under the Venture Capital Act (section 9(6)-(7)). Disputes over the meaning of "substantial part" of amounts held for investment, or what constitutes the "dominant purpose" of an investment, are plausible sources of contestable administrative decisions because those standards determine whether funds comply. Judicial review could engage errors of law or reach factual sufficiency questions depending on how migration decision makers apply the instrument alongside regulation 5.19C.

• Allocation and measurement disputes. The instrument requires complex measurements: percentages of fund net assets, market capitalisation at time of first investment and thereafter (section 10(6)), 20 issuer minimums within three months (section 10(10)), per-issuer 10 per cent caps (section 10(11)), and proportionate caps on foreign quoted or other categories (sections 10(7)-(9) and 12(10)). Disagreement over the correct valuation date, valuation methodology, treatment of valuation changes post-investment, or the classification of an instrument (e.g. whether an instrument is a "debt or equity instrument" for residential real property exposure limitations in section 12(7)(b)) could generate legal disputes.

• Application of escrow and guarantee arrangements. The instrument prescribes escrow or guarantees from Australian ADIs (sections 9(2)(b) and 9(3)). There can be factual disputes about whether a particular guarantee or escrow arrangement satisfies the section’s requirements. If a decision maker finds non-compliance due to a technical escrow shortcoming, judicial review or administrative merits review could follow.

• Interaction with other statutory regimes. Questions may arise about how the prescribed requirements intersect with Corporations Act licensing rules, ASIC enforcement actions, or the Venture Capital Act’s conditional registration regime. For example, when a fund’s conditional registration lapses and reimbursement occurs, the instrument requires reinvestment into another venture capital fund (section 9(6)-(7)). Litigation may arise as to whether the instrument allows alternative treatments or the scope of the Commissioner’s discretion in accepting reinvestment evidence.

• Procedural fairness and evidentiary sufficiency. As the instrument defines compliance facts that visa decision makers must assess, judicial review could be sought where applicants argue adverse administrative decisions failed to consider evidence, misconceived the instrument’s requirements, or denied procedural fairness.

No actual cases or judicial outcomes exist in the text to describe. Practitioners should anticipate that enforcement and interpretive disputes will be resolved within migration decision-making processes and through the ordinary administrative and judicial review routes in migration and administrative law. The instrument itself supplies the legal tests that would be focal points in any dispute.

The instrument contains multiple technical requirements and several features that generate practical compliance traps. Below are concrete pitfalls flagged by the text.

1. Timing and "on or after application" requirement. Section 8 requires that investments be made on or after the time of application for the relevant visa. Investments made before application will not qualify. Practitioners must ensure no pre-application investments are relied on to meet the required investment amounts.

2. Escrow and deposit timing at decision. Section 9(3) requires that at decision time at least 20 per cent of the total investment be held in prescribed ways (escrow or ADI guarantee, or on deposit in cash management trust or ADI). This is not the same as "investment deployed" in the underlying asset; it is a custody requirement that must be evidenced at decision time. The investor must therefore coordinate escrow, ADI guarantees, or deposit confirmations to coincide with the visa decision window.

3. "Substantial part" is undefined. Section 9(4) requires that a substantial part of amounts held under the escrow/security arrangements be invested during the period the visa is in effect, but "substantial part" is not quantified. This creates uncertainty and risk of adverse assessment if the decision maker applies a high threshold. Practitioners should avoid borderline allocations and document investment plans.

4. Legacy applicant differentials. Applicants invited before 1 July 2021 have different timeframes and quantum requirements (sections 7(3), 9(2A), 9(3A)). Failing to identify legacy status or to apply the correct thresholds could cause errors.

5. Market capitalisation mechanics and growth ceilings. Section 10(6)(a) requires target issuers to have market capitalisation below AUD 500,000,000 at the time of first investment. Section 10(6)(b) then caps the proportion of the fund’s net assets that can be held in issuers that grow to AUD 500,000,000 or more at 30 per cent. Practitioners must track historical first-investment dates and subsequent market capitalisation moves; failure to document valuation bases or first-investment snapshots risks non-compliance.

6. Diversity and issuer concentration requirements. A managed investment fund must hold securities issued by 20 or more issuers within three months of first investment (section 10(10)), and no more than 10 per cent of the fund’s net assets may be in securities of any single issuer immediately after a given investment (section 10(11)). These rules constrain concentrated small-cap strategies and require tight execution and documentation by fund managers.

7. Cash limits and fund-of-funds operational windows. Section 12(10) caps cash in a managed fund to 20 per cent of net assets. Fund of funds and investor directed portfolio services may hold cash for up to 30 days and during switching periods (section 12(11)). Therefore, fund managers and custodians must manage cash flows to avoid triggering the 20 per cent ceiling, and document any permitted short-term holds under the 30-day exception.

8. Residential real property restrictions. Managed funds cannot make direct investments in Australian residential real property (section 12(7)(a)). Further, other residential real property investments are allowed only subject to a 10 per cent fund net asset cap and not be for the dominant purpose of deriving financial benefits or assisting the investor or family unit to reside or gain legal ownership in Australian residential real property (section 12(7)(b) and 12(8)). The "dominant purpose" test is subjective and fact-sensitive; investments close to these lines are risky.

9. Derivatives limits. Section 12(9) permits derivatives only for risk management and not for speculative purposes, and they cannot be used to materially reduce or completely eliminate exposure to emerging companies investments. Careful design and documentation of any hedging strategies is necessary to avoid classification as prohibited speculative activity or capital guarantee structures.

10. AFS licence and central management requirements. Issuers and authorised managers must hold or be covered by an Australian financial services licence or be exempt (section 12(2)). Central management and control must be in Australia (section 12(4)). An investor associated with a manager cannot be the manager (section 12(5)). These rules prevent investors from self-managing or using related-party managers; failure to observe them will void compliance.

11. Funds under management threshold. Section 12(6) requires that trustees, responsible entities or issuers maintain at least AUD 100,000,000 in funds under management in Australia for several vehicle types. Small managers will therefore be ineligible to accept complying investment dollars under those vehicle types.

12. Reinvestment obligations on realisation and reimbursement. If an investment is realised before visa cessation, the realised amount must be reinvested in permitted instruments (section 9(5)). If a venture capital fund’s conditional registration lapses and investors are reimbursed, the reimbursed funds must be put into another venture capital fund (section 9(6)-(7)). These rules create reinvestment timing and asset selection constraints.

13. Audit apparent retroactivity. The audit requirement is stated as beginning financial year 2021-22 (sections 10(12) and 11(4)), which precedes the instrument’s commencement date of 2025 (section 2). Practitioners should expect regulators to insist on audit evidence for years before 2025 and clarify this point with Departmental guidance.

14. Short remedial window. Section 13 permits a 10 business day remedial window for certain breaches of section 10 and the cash limit in section 12(10). Outside that window, the breach may be treated as ongoing non-compliance with possible migration consequences.

15. Reliance on other instruments. The instrument frequently notes that regulation 5.19C of the Regulations contains additional requirements (section 6 Note 1). Practitioners must coordinate compliance with both the Regulations and this instrument and cannot rely on the instrument alone.

Practitioners should therefore structure transactions to create clear, contemporaneous documentary trails for escrow/guarantee arrangements, fund prospectuses, valuations at first investment, audit reports, AFS licences, funds under management evidence, and evidence of reinvestments to meet the instrument’s tests.

Below is a practical compliance checklist and recommended operational steps grounded in the instrument’s text. Each step cites the relevant provision the instrument contains.

1. Assess applicant status and applicable thresholds

• Determine whether the applicant falls within the legacy category (invited before 1 July 2021) because sections 7(3), 9(2A) and 9(3A) impose different quantum and timing (AUD 500,000 VC min and AUD 1,500,000 emerging companies, and a 12 month VC commitment window). If so, apply those thresholds.

2. Portfolio design and allocation

• Allocate at least 20 per cent of the total required investment to venture capital funds compliant with section 9 and at least 30 per cent to emerging companies investments compliant with section 10 (section 7(1)(a)-(b)). Any remainder may be in venture capital funds, emerging companies investments, or balancing investments (section 7(2)). For legacy applicants apply the specified dollar minima in section 7(3).

3. Choose vehicles and managers that meet managerial and licensing requirements

• Use venture capital funds registered under the Venture Capital Act 2002 or eligible venture capital fund structures as defined (section 4). Ensure issuers, trustees or responsible entities hold (or are covered by) an Australian financial services licence or are exempt (section 12(2)-(3)). Make sure the central management and control of the issuer or manager is in Australia (section 12(4)).

4. Ensure funds-under-management thresholds

• Verify that, if investing through the vehicle types listed in section 12(6), the trustee, responsible entity or issuer maintains at least AUD 100,000,000 in funds under management in Australia. Obtain documentary evidence (e.g. fund fact sheets, audited AUM figures, declarations from the responsible entity) to demonstrate compliance.

5. Escrow, guarantee and deposit arrangements for venture capital commitments

• For the venture capital component, enter agreements with the general partner(s) between application and six months after visa grant (or 12 months for legacy applicants) (section 9(2)-(2A)). Ensure each venture capital investment amount is either:
  • held in escrow in favour of the general partner, or
  • held as security for a guarantee issued by an Australian ADI in favour of the general partner (section 9(2)(b)).
• At decision time ensure at least 20 per cent of the total investment is held in one of the permitted ways or on deposit in a cash management trust or Australian ADI for investment (section 9(3)-(3A)). Obtain escrow agreements, ADI guarantee letters on ADI letterhead and deposit confirmations for evidentiary purposes.

6. Managed fund design and asset eligibility checks for emerging companies investments

• Route emerging companies investments through managed investment funds (section 10(2)). Acceptable assets include ASX-quoted securities, non-ASX Australian quoted securities, qualifying unquoted Australian securities (Australian issuers or trustee structures with central management and control in Australia; section 10(4)), foreign quoted securities and permitted cash and derivatives subject to other restrictions (section 10(3)). Exclude government securities and debentures from the emerging companies component (section 10(5)).
• Apply market capitalisation tests: at time of first investment, the company or managed investment scheme must have market capitalisation < AUD 500,000,000 (section 10(6)(a)). Track and record the valuation at first investment and maintain records.
• Monitor growth: ensure that at any time the proportion of the managed investment fund’s net assets in issuers whose market capitalisation has since grown to ≥ AUD 500,000,000 does not exceed 30 per cent (section 10(6)(b)).
• Ensure diversification: maintain securities issued by 20 or more different issuers within three months of first investment (section 10(10)), and limit any single issuer exposure to no more than 10 per cent of net assets immediately after investment (section 10(11)).
• Observe sub-limits on categories: no more than 20 per cent in Australian non-ASX quoted securities (section 10(7)), no more than 20 per cent immediately after investment in unquoted Australian securities (section 10(8)), no more than 10 per cent in foreign quoted securities (section 10(9)).

7. Balancing investments compliance

• If using balancing investments, invest through managed investment funds and limit permitted assets to the list in section 11(3) (quoted securities, appropriate bonds and notes, qualifying annuities, Australian real property subject to section 12 limits, cash, and derivatives subject to section 12 restrictions). Ensure annuities do not repay capital during the visa period (section 11(3)(c)).

8. Australian residential real property restrictions

• Do not make direct residential real property investments through the managed investment fund (section 12(7)(a)). Any other exposure to residential real property must be capped at 10 per cent of the fund’s net assets, not be for the dominant purpose of deriving financial benefits, and not be principally intended to assist the investor or family unit to reside in or gain ownership (sections 12(7)(b)-(8)). Document investment purpose and fund mandate to demonstrate compliance.

9. Derivative usage

• Limit derivative use to explicit risk-management purposes, avoid speculative derivative positions, and ensure derivatives are not designed to materially reduce or eliminate exposure to market price changes of emerging companies investments (section 12(9)). Prepare written hedging policy and contemporaneous evidence that derivative positions are hedges.

10. Cash and fund-of-funds management

• Ensure no more than 20 per cent of a managed investment fund’s net assets are held as cash with Australian ADIs (section 12(10)). If investing via a fund-of-funds or investor directed portfolio service, use the permitted 30-day cash holding window and the switching period described in subregulation 5.19C(7) and 5.19C(8) (section 12(11)). Record fund-of-funds underlying holdings and confirm underlying funds’ compliance.

11. Audit and record-keeping

• Obtain annual audits for the emerging companies and balancing investment components beginning financial year 2021-22 (sections 10(12) and 11(4)). If relying on earlier years, prepare retrospective audit evidence as documentation. Keep records of escrow or guarantee instruments, deposit confirmations, fund prospectuses, subscription agreements, fund valuation methods, first-investment valuation snapshots, AFS licences, responsible entity declarations of AUM, and audit reports.

12. Associate and related-party prohibitions

• Ensure the investor, spouse or de facto partner and any associates are not the issuer or involved in management or control of the issuer (section 12(5)). Obtain declarations and perform due diligence to demonstrate independence between investor and issuer/manager.

13. Reinvestment planning

• Have documented reinvestment procedures in place to meet the obligations in section 9(5)-(7) in case of realisation or reimbursement during the visa period. Document timelines for reinvestment and source of funds to avoid temporary non-compliance.

14. Document templates and evidentiary checklist

• Maintain a compliance pack that includes:
  • Subscription agreements with GPs showing commitment dates in the permitted window (section 9(2));
  • Escrow agreements or ADI guarantees (section 9(2)(b), 9(3));
  • Deposit confirmations with cash management trusts or Australian ADIs (section 9(3));
  • Responsible entity / trustee / issuer AFS licence evidence or exemption documentation (section 12(2));
  • Evidence of central management and control in Australia (section 12(4));
  • Statements proving funds under management in Australia (section 12(6));
  • Annual audit reports covering emerging companies and balancing components (sections 10(12), 11(4));
  • Investment fund factsheets and portfolio breakdowns showing issuer counts and per-issuer concentrations (section 10(10)-(11));
  • Policies for derivatives and hedging (section 12(9));
  • Evidence that residential real property exposure conditions are met (section 12(7)-(8)).

15. Liaise with migration advisers and Department case officers

• Coordinate the investment evidence submission timing to coincide with visa application and decision windows, noting that investments must be made on or after the application date (section 8) and that certain holdings must be evidenced at decision time (section 9(3)). Confirm early with migration advisers how the Department will accept escrow and guarantee evidence and how they treat fund-of-funds or investor directed portfolio services in practice.

16. Clarify audit retroactivity and regulatory expectations

• Because the audit requirement is stated to begin in financial year 2021-22 (sections 10(12) and 11(4)) despite the instrument’s 2025 commencement, seek written guidance or confirmation from the Department on whether retrospective audits are required and the acceptable scope and format.

Following this checklist aligns the investor’s portfolio design, fund selection, custody arrangements and documentation with the instrument’s requirements. Given the instrument’s cross-references to other legislation and to subregulation 5.19C, practitioners should concurrently verify compliance with the Migration Regulations and the Corporations Act licensing and managed funds rules.