1. IS ART A LEGITIMATE INVESTMENT ASSET FOR RETIREMENT SAVINGS?
Yes. There is a wealth of evidence, locally and internationally, that confirms art as a legitimate form of financial investment that can build retirement savings.
The Cooper Review lumps “paintings” in with “jewellery, antiques, stamp collections, wine, exotic cars, golf club memberships and boats” as examples of what it calls ‘collectables’ and ‘personal-use assets’, which it recommends be banned from SMSFs.
Specifically, the Cooper Review interim report on Self Managed Super Solutions states:
“While the Panel recognizes and supports the freedom of investment choice that SMSFs afford their members, it believes that there are certain types of assets that should not be regarded as investments that build retirement savings and which consequently should not be available to SMSFs. Such assets are broadly equivalent to ‘collectables’ and personal use assets’ for tax purposes”.
“The Panel accepts that some of these types of assets may appreciate in value over time and investors with the appropriate specialist knowledge can profit out of them.
“However, the panel points out that people who want to own such assets are free to do so outside the SMSF environment in a way that does not involve special concessions from the tax system”. (p 32-33, Cooper Review, Self Managed Super Solutions).
The Cooper Review premise that investments in art “should not be regarded as investments that build retirement savings” (p 32, Cooper Review, Self Managed Super Solutions) is fundamentally flawed.
SAVE SUPER ART says art is a legitimate investment asset that can build retirement savings, and we have detailed evidence with which to prove that case.
2. WHAT ARE THE REGULATORY AND COMPLIANCE ISSUES?
The Cooper Review interim report states:
“The principal concern is that the cumulative regulatory and compliance complexities outweigh the potential benefits of allowing such a liberal investment menu to a sector that is not directly prudentially regulated”, (p 32-33, Cooper Review, Self Managed Super Solutions).
The issues raised by the Cooper Review regarding regulatory and compliance complexities have already been addressed appropriately in relation to art investments by the Australian Tax Office’s Draft Self Managed Superannuation Funds Ruling SMSFR 2007/D1.
To our knowledge, the guidelines established by the ATO encompassing the sole purpose test in relation to art have been widely adopted by auditors, and are being applied consistently.
The concerns raised by the Cooper Review in relation to investment in art by SMSFs are therefore simply not valid, and provide no good reason for banning the asset category.
As such, the Cooper Review recommendations take away a freedom, for no good purpose.
SAVE SUPER ART says there is no valid reason for banning art investments in SMSFs.
3. WHAT ARE THE “UNINTENDED CONSEQUENCES” OF THE COOPER REVIEW RECOMMENDATIONS?
The release of the Cooper Review recommendations on 29 April 2010 to ban artworks from SMSFs came out of the blue for the arts industry.
It caused immediate “unintended consequences” with galleries and consultants around the country reporting lost sales due to a new and unexpected uncertainty with no comment from government.
It is estimated that there are approximately 5,000 businesses within what may be described as the Greater Australian Fine Art Industry. The attached diagram shows how inter-related these businesses are in an industry with a combined annual turnover of $1.5 billion.
If implemented, the effects on the art industry would be disastrous, seriously damaging the livelihood of Australia’s visual artists, destroying a wide range of support services, and leading to the likely demise of employment opportunities and numerous small businesses within the sector.
Such an outcome would be in contravention of the Government’s commitment to building a National Cultural Policy based on:
“Labor’s unshakeable belief that government does have an important role to play in this sector, that the arts and creativity deserve our recognition and support…we are increasingly recognising the role that the arts play in developing our communities, shaping our culture and supporting our economy”. (The Hon Peter Garrett AM MP, Minister for the Arts, “A National Cultural Policy to 2020, National Press Club Address, 27 October 2009).
SAVE SUPER ART calls on the Rudd Government to rule out the recommendations now, because they are fundamentally flawed, are already creating damaging uncertainty in the Australian art market, and, if implemented, would create disastrous “unintended consequences” for the Australian art industry.
