Perth’s arts industry, worried by the federal government’s new regulations around self-managed superannuation funds’ investment in collectables and fine art, got their chance last week to tackle superannuation minister Bill Shorten over the changes.
The minister attended a forum hosted by the WA chapter of the Australian Commercial Galleries Association and addressed concerns that stringent new rules around storage, insurance, auditing and administration of art in SMSFs were hitting the art market.
“As an industry, we are looking for a level playing field, but with these amendments that have come into play, we not only have ditches and barriers before us, but we now have clients that are no longer interested in acquiring art through their super funds,” GFL Fine Art owner Ian Flanagan said.
The main issue the industry has with the regulations is they are aimed at ensuring SMSFs do not breach the sole-purpose test by hanging artwork and deriving a present-day benefit from it rather than generating wealth for retirement.
Mr Shorten said: “Tax concessions granted by the Commonwealth are granted by other taxpayers. If they are going to give away concessions … it is for the sole purpose of preparing for retirement. If we start saying superannuation is not for retirement and for the present, you are going to kill the system.”
An art investor, who attended the meeting, illustrated his feelings by showing Mr Shorten a frame containing a BHP Billiton share certificate covering the framed glass of a Picasso, both of which he holds in his SMSF.
“I derive and take a great deal of pleasure from looking at my share certificate all the time up there on the wall and I wonder if you see a problem with that,” the investor said. “Both of those benefits to me are incidental, they are on paper, and the real benefit I get is ultimately, after achieving 65, if I should decide to sell.”
Mr Shorten based his response on what he said was equality in the system.
“Not everyone is going to be able to, in their superannuation fund, have a Picasso,” he said.
“Is it the right allocation of the tax concession that a person takes a concession for that which is not available to a whole lot of other people?”
Mr Shorten said, however, he did recognise that some of the outcomes from the new rules were akin to the original recommendation of last year’s Cooper report into superannuation, which was to remove art from SMSFs’ investment options.
“If the regulations we are putting in place are that draconian that we see a total drought in investment and that people just give up on art as an asset class, then that is sort of implementing the Cooper report by stealth,” he said.