The Australian investor visa scheme, encompassing Australian Investor Visas and Significant Investor Visas, is arguably the most complex visa program available for prospective migrants. Its plethora of rules and regulations dictate in minute details how an investment ought to be made and which funds may be invested.
Funds for Investor Visas
For our purposes today, we look at the application of two rules facing investor migrants.
Firstly, it is a requirement that all funds forming part of the investment are unencumbered. The meaning of encumbrance in this context can be complex, and has been disputed in many past instances. On a related note, the concept of lawful acquisition also plays into the assessment of SIV applications.
The term ‘unencumbered’ is not defined in either the Act or the Regulations. In general terms, funds will be regarded as “encumbered” where there is scope for a direct claim upon the funds by some other third party. This interpretation is supported by policy and forms the foundation of our understanding of this provision. For this reason, funds borrowed using a separate asset as security will not be regarded as encumbered as the “direct claim” of the creditor would be against the asset used as collateral and not the borrowed funds themselves.
This separation between secured loan funds and collateral creates opportunities for visa applicants flexibility in relation to wealth management and transfer of investment funds from one’s country or origin to Australia. Such arrangements should only be considered on the advice of expert SIV investment managers, in conjunction with well-practiced migration solicitors.
Given the stringent rules surrounding Australian investor visas and SIV, cavalier financial dealings can often irreparably prejudice your Subclass 188 or 888 visa applications.
Loans for Investor Visas
As testament to the comparative complexity of this area, there are instances where the concept of “encumbrance” is misconstrued by the delegates of the Department of Home Affairs. As an illustration, in the matter of Pei & Ors v Minister for Immigration  FCCA 2068, it was found by the Department that a gift of monies from a first applicant to a second applicant, obtained by way of a loan secured against the properties of both applicants, were encumbered. More puzzling, it was further found that rent, paid to the first applicant, was also not unencumbered.
Unable to take the matter to the Administrative Appeals Tribunal, the matter was heard before the Federal Circuit Court of Australia. At trial, the Minister for Immigration and Border Protection agreed that the delegate had made the decision in error, instead basing their defence on jurisdictional grounds.
This position was emphatically reiterated by the Federal Circuit Court which held:
“There can be no doubt that the applicants are correct with respect to the error which occurred in relation to the meaning and application of the term ‘unencumbered’ by the delegate. If the findings of the delegate with respect to the advance rental payments and the loan was the only basis on which the visa had been refused, then this application would have been successful.”
In summary, the court, in reference to the Migration Regulations 1994 (Cth), understood the term “unencumbered” to mean “free from mortgages and claims from creditors” which these funds themselves were. Again highlighting the distinction between funds from a secured loan and the assets which act as security for said loan.
Though the applicants in the above matter were ultimately unsuccessful on other grounds, it nevertheless emphasises the importance of careful preparation of one’s application, the proper construction of the term “unencumbered” and the utility of a comprehensive legal submission to help ensure the decision maker understands the considerations before them.
Trusts for Investor Visas
Another series of complications arise when considering encumbrance and lawful acquisition within the operation of a trust.
For those unfamiliar with the peculiarities of Australian laws of enquiry and trust, or from jurisdictions where the law of trusts is underdeveloped, the use of trust structures can be fraught with legal dangers, including with respect to migration.
In relation to the concept of encumbrance, the matter of Zhang (Migration)  AATA 2968 is illustrative. The matter concerned an applicant who received a substantial monetary sum from her father via a deed of gift. The trustee in this matter was an Australian proprietary company, the shares in which were entirely owned by the applicant.
The delegate of the Department of Home Affairs took issue with this transfer on the basis that incomplete taxation documents had been provided in relation to the source of these funds. As such, the delegate maintained reservations as to the “lawful acquisition” of these monies, as questions could be posed as to . The question before the Administrative Appeals Tribunal was twofold. Were the funds lawfully acquired and were they unencumbered?
On the first question, additional information regarding the trustee’s tax documentation allayed any concern as to the legality of said funds.
On the second question, the Tribunal looked to the terms of the trust deed. It was clear on inspection that the proprietary company held authority as trustee to transfer the monies to the applicant as beneficiary. It thus becomes clear that funds disbursed from a trust must have come into the applicant’s possession in a manner consistent with the applicable deed of trust. Improper disbursement, say in the event of a breach of trustee duties, may in fact render investment funds unlawfully acquired.
Evidentiary Threshold for Investor Visas
It is a common misconception that a cursory explanation of one’s initial wealth is sufficient to assuage any fears of unlawful acquisition or encumbrances. Such a misconception led to the matter of Wu (Migration)  AATA 1092, where said applicant’s Subclass 188 visa was refused, not for reason of any ostensible adverse information, but rather due to the insufficiency of evidence supplied to the Department of Home Affairs at first instance.
In this matter, the source of the applicant’s funds could be traced through a lengthy history of business dealings spanning several decades. This trail included a poorly evidenced load between two businesses owned by the applicant’s husband. Holes in the paper trail and incompetence of the applicant’s initial migration agent left her application open to refusal on speculative grounds.
Over the course of the Tribunal hearing, a significant volume of documents were put before the member for consideration. It was identified by the Tribunal that whilst shortcomings existed within the evidentiary documentation provided at first instance, it was nevertheless incumbent upon the Tribunal to seek information on which to reasonably make its decision.
The applicant was requested to provide significant additional information to the Tribunal. In instances where such information was unavailable, comprehensive sworn statements were provided by the applicant to account for these deficiencies. It was this combination of documentary evidence, sworn statements and written testimony that the applicant was able to meet the stringent evidentiary burden placed upon business visa applicants.
Best Australian Investor Visa Lawyers
In short, the substantiation of the source and nature of funds is a crucial component of the SIV process. An inability to account for one’s savings for use in Australian investments can and will result in unfavorable visa outcomes for one’s family and one’s self. It is for this reason that comprehensive legal assistance should be sought before embarking on a complex, time-consuming and expensive Subclass 188 application.