188B and 188C Rules

188 visa

188B Rules and 188C Rules

Both the Investor and Significant Investor streams of the Subclass 188 visa offer many advantages to aspiring business skilled migration applicants. Whilst attracting a higher investment threshold, these streams exempt prospective applicants from many of the criteria applicable to the Business Innovation stream. In particular, permanent residency under these streams is not contingent on the ability of the visa applicant to establish a business in Australia.

The main feature of these streams involve the requirement that a Subclass 188 holder maintain an investment of a prescribed amount for a period of no less than 3 years, in order to qualify for permanent residency.

Visa applicants are not free to distribute their investment funds however they choose. All Subclass 188B and 188C investments must comply with a statutory “Complying Investment Framework,” or CIF. 

We hope to shed some light on the CIF requirement in order to help prospective applicants understand where their money is going.


Who can manage my SIV fund?

All funds included as part of one’s CIF compliant investment must be managed by an Australia-based financial services licensee. It is not permissible for a visa applicant to directly manage any fund included as part of a complying significant investment. Additionally, any financial services licensee providing assistance in relation to your SIV investment must maintain a minimum of $100,000,000 in firm-wide funds, precluding smaller outfits from offering complying funds to applicants, subject to exemptions.

As such, a successful applicant will take care in securing both a competent, experienced migration agent as well as a reputable financial service provider who understands the special circumstances and requirements of SIV applicants.


Complying Investment Framework

The CIF requires funds to be broken down into several categories of investment. These proportions are delineated as percentages of the total investment funds. This breakdown is as follows:

  • 20% value in venture capital and Private Growth Equity funds (VCPE);
  • 30% value in emerging companies; and
  • 50% in balancing investments.

Further information on the above components have been provided hereunder.

It is important to note that each component can be satisfied through investment in one or more compliant funds. It is not required that each component be composed of investments in a single fund.

It is, however, pivotal that prospective applicants obtain independent financial product advice from an accredited financial services licensee with experience in providing assistance to SIV applicants. Such advice is beyond the scope of a migration solicitor’s remit.


Venture Capital and Growth Private Equity Funds

10% of said investment must be in a venture capital or Growth Private Equity fund (“VCPE fund”). Despite being the smallest of the three components, the precise requirements of this VCPE investment occasion the greatest uncertainty amongst prospective applicants.

What’s more, under Section 9-1(c) of the Venture Capital Act 2002 (Cth), these agreements will, in almost all cases, be of a duration in excess of the 3 years required for the Subclass 888 visa. Due to this extended duration before realisation and perceived greater degree of risk, we place special attention on outlining the precise makeup of the VCPE component.


What am I investing in?

The VCPE may constitute either an AusIndustry registered Early Stage Venture Capital Limited Partnership (“ESVCLP”) or Venture Capital Limited Partnership (“VCLP”) fund.

Pursuant to the provisions of Division 9 of the Venture Capital Act 2002 (Cth), and Sections 188.427 and 188.425 of the Income Tax Assessment Act 1997 (Cth), a VCLP must be comprised of “eligible venture capital investments,” with each investment:

  • Being a company or unit trust
  • Not being, or having ceased to be, a listed investment
  • Not constituting more than 30% of the VCLP’s committed capital
  • Be “at-risk” regarding the value and earnings of the investment
  • Having a total asset value of no more than $250,000,000
  • Having more than half of its employees and half its assets located in Australia

Furthermore, investees must not be predominantly involved in any of the following activities:

  • Property development or land ownership
  • Construction or acquisition of infrastructure
  • Finance, insurance, or passive investment

The distinction between an ESVCLP and regular VCLP is best discussed with your nominated AFS licensed fund manager and tax accountant. In short, whilst the ESVCLP comprises higher risk investments, it may attract a range of tax-based incentives and concessions.

The above serves to merely scratch the surface of the regulatory requirements governing the composition of one’s VCPE. Whilst many popular investment options are precluded as investees, the regulations do not necessarily require high risk investments. It is again a matter for one’s fund manager to discuss how best to mitigate risk within the confines of the above regulations.

With the assistance and careful stewardship of a skilled fund manager, the VCPE component need not constitute a write-off. Rather, it is pivotal that one secures the highest quality financial services, in addition to the best migration advice, in order to mitigate the risk of investment loss whilst maximising prospects of a successful visa outcome.


Emerging Companies

Further to the VCPE requirements, the CIF requires that at least 30% of investment funds be invested in emerging companies. Once again, in order to ensure investment is directed in accordance with Government policy objectives, this component is subject to a plethora of regulations and requirements regarding what many of the investments of the fund may contain in its portfolio.


What am I investing in?

Each investment must be in a managed fund. The rules applicable to this fund aims to direct investment into particular types of financial products and enforce diversification of the portfolio by capping the percentage each type of investment may constitute. The below table outlines the permissible investments which may be held by the managed fund and the maximum percentage of the overall managed fund each may constitute.

Investment TypeMaximum % of total
ASX quoted securities20
Australian non-ASX quoted securities20
Unquoted Australian securities20
Foreign quoted securities10
Cash held by an Australian ADI20
*Investment in derivatives is permissible for risk management purposes only.

In contrast, the following investments are forbidden:

  • Government issued securities (bonds etc)
  • Debentures

Much like the VCPE scheme, a maximum threshold is set for the total market capitalisation of any investee. The threshold in question is currently set at AUD$500,000,000, theoretically permitting investment in securities and funds offering reduced risk when compared to the lower threshold of VCPE investees.

Further to the above, the investment fund must maintain securities issued by 20 or more different issuers. Investments by any one particular issuer must not constitute more than 10% of the total investment by the fund.

In short, this component enforces a significant degree of diversification whilst relaxing slightly the limitations on investment options. As with the CIF generally, specific options are best guided by one’s nominated fund manager.


Balancing Investment   

The remaining 50% of investment funds are to be held in what is termed a “balancing investment.” This component offers the greatest degree of flexibility in terms of investment composition. Once again, the balancing investment must be made in the form of one or more managed funds, each composing of permitted investments. We outline all permitted investments below:


The balancing investment may be composed of securities issued by various bodies quoted on an Australian securities exchange. Such bodies may include companies, real estate investment trusts (A-REIT), or infrastructure trusts.


In addition to securities, bonds notes may also form part of the balancing investment where issued by a company quoted on an Australian securities exchange or a wholly owned Australian subsidiary thereof.

In some instances, bonds and notes issued by any company incorporated in Australia, or a registered foreign company, may also be permissible, provided said investment instruments are rated as “investment grade” by an AFS licensee credit rating agency.


Investments may also include annuities issued by Australian companies who are registered by the Australian Prudential Regulation Authority under Section 21 of the Life Insurance Act 1995 (Cth).

Such annuities must be deferred such to be of a sort whereby no capital is replayed during the period of one’s Subclass 188 visa.

Australian real property

Unlike other components of the complying significant investment, real estate may form part of the balancing investment fund portfolio. As a traditionally popular investment option, additional restrictions are placed on this form of investment. These restrictions are in relation to residential property, or land zoned as residential use. The balancing investment fund is precluded from making any direct residential real property investment. Investment in residential property must thus be made through some other means, such as a derivative or an equity instrument. In any case, residential property investments must not constitute more than 10% of the value of the fund’s net assets.

Cash held by Australian ADIs

Up to 20% of the balancing investment fund may be constituted by cash held by Australian ADIs. This may include certificates of deposit and bank bills.


Much like the “Emerging Companies” component, the balancing investment fund may invest in derivatives, but only where said investment is made for risk management purposes only.  Such investments must also not constitute a speculative investment.

Market Capitalisation and High Growth

Market capitalisation limits raise questions as to legal compliance in instances where a particular investment experiences significant appreciation in value. Fortunately, some leeway is given.

Under these arrangements, securities and managed investment schemes whose market capitalisation has grown in excess of the $500,000,000 limit since the time of first purchase may constitute up to 30% of the total value of the fund’s investment. Despite this, it remains the responsibility of the fund manager to ensure that the makeup of the emerging companies component is compliant with legislation.


Investor Visa Lawyers

Permanent residency is a huge step for any prospective migrant. Business skilled visas necessitate a greater degree of commitment and assumption of risk when compared to most other pathways. This inherent risk is further compounded by the relative complexity of legislation surrounding the granting of such visas. Due to these realities, obtaining the right kind of assistance from the right sources is paramount as the scheme largely necessitates a high degree of professional guidance.

As experienced legal practitioners, specialising within the area of business migration, Visa plan is well situated to assist you in achieving your migration goals. Our extensive professional networks can further assist in identifying financial service providers with the credentials to manage your SIV significant investment fund. The rules governing your SIV fund are esoteric and unique to the Australian business skilled migration scheme, and so the importance of engaging the right fund manager cannot be overstated.

Ensuring compliance with investment guidelines is crucial to your transition to Subclass 888. As such, it is imperative that you make detailed inquiries to your prospective fund manager to ensure they are both competent and prepared to work with your migration agent in ensuring compliance of your fund.

Ultimately, the purpose of your investment is to secure the future of your family in Australia. Whilst maximising returns is understandably a consideration of enormous importance, ensuring that your fund will qualify you for permanent residency is of comparable materiality.

To discuss your potential eligibility for this visa, please contact our team of migration solicitors on +61 3 9958 5854 for your free preliminary assessment.


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