Proposing changes to the rules governing artwork investment by SMSFs will be very attractive to the art market. The Labor Party would be wise to make this a bipartisan issue, even if it means acknowledging their 2011 super art laws were a mis-step.
Gottliebson claimed that at this stage it was still a rumour, however his story backs up a letter sent earlier this year by Michael Keenan, Shadow Minister for Justice, Customs and Border Protection to one of his constituents in Perth:
"The coalition is not convinced that the public display of art would breach the sole purpose test in superannuation and we see no reason as to why any artificial distinction should be drawn on the basis of where trustees choose to display art purchased by self-managed superannuation funds (SMSFs). Our position on the treatment of collectibles within SMSFs will be released along with our superannuation policy in the lead up to the next election."
Such a policy would be a welcome acknowledgement that the super art laws introduced in 2011 should not have mandated storage and insurance requirements completely out of keeping with the realities of the art market. That is, one of the major reasons for buying artwork is the pleasure of actually looking at said artwork properly hung or installed.
From a common law point of view, a trustee or a member of a SMSF should not be regarded as breaching the sole purpose test (which prescribes that SMSF assets are bought with the sole purpose of providing retirement benefits) merely by looking at an artwork it has invested in. The very concept seems absurd but this concept is currently enshrined in legislation thanks to the super art laws of 2011.
If the sole purpose test for artwork investments is to be changed then the related party rules must also change. There are many businesses who would like to display artworks bought through their SMSF on their premises but the current laws prohibit this practice. And the businesses that are relying on the pre-2011 laws have less than three years before they too will have to remove their SMSF artworks from their offices or risk their funds becoming non-compliant and exposed to penalties.
Should both parties agree to make changes to the super art laws, a priority must be to separate artwork investments from the other exotic investments in the "collectables" category.
Anecdotally galleries and artists are reporting little or no activity from SMSFs but Australian Taxation Office (ATO) statistics show a continuing increase in the amount invested by super funds in the collectables category.
According to the ATO at 30 June 2012 SMSFs held $743m in collectables and this figure apparently increased to $771m by 31 March 2013. It is impossible to know how much of this investment is held in artworks as opposed to antiques, gold coin, stamps, vintage cars, wine, yachts and other personal use assets.
There would seem to be little point in making major super art law changes and then not be able to measure the impact these changes would have on the art market.
