28 August 2003

Collectables: Art & Super Funds

Hanging offence: To hang or not to hang. That is the crucial question confronting today's super fund trustee, reports Michael Hutak

FINE ART has long been considered a legitimate asset class within the investment strategy of some of Australia's biggest superannuation funds. C+BUS for example, the building industry fund, counts its important art collection housed in regional galleries around Australia among assets of more than $3.5 billion.

But the most action in this area in recent years has been at the other end of the market, as private collectors rush to purchase art as part of their Self-Managed Superannuation Fund.

SMSFs have been the fastest growing sector of the super industry with approximately AUD$95 billion under management out of a total $530bn. The Australian Tax Office says SMSFs have grown by almost 25 per cent over the last three years to around 240,000 funds. It receives 1,000 new registrations each month and there are around 408,000 people with accounts, with an average balance of $234,000.

With the total secondary auction market in fine art in Australia at just $80 million per annum, the art trade understandably sees a great opportunity to grab a bigger slice of the estimated $10 billion that flowed into SMSFs during 2001-02.

The art market has a good story to tell potential investors: that $80 million already represents a quintupling of the auction market in just a decade. And headline-grabbing sales of telling of 100, 200 even 300 per cent returns for works by artists across all sectors of the market – traditional & modern, contemporary, and aboriginal art – make investing in art an easy, even sexy, sell.

Targeting the small investor, many galleries and art “consultants” are currently spruiking art in an SMSF as making “more sense than other assets in that you can hang it on your wall at home or office and have the visual pleasure of your own work of art.” One gallery’s web site even states: “It is a little known fact that it is perfectly legal to purchase investment artworks, acquired through your super fund, hanging on your wall at home.”

In fact this is not ‘little known’. It’s also not true. The big art-super push has hit a big snag called the ATO. “We’ve gone through this already with people trying to claim anything from Swiss chalets to Coles-Myer cards,” says Matt Frost, superannuation spokesperson for the ATO.

“The bottom line is yes, you CAN certainly invest in art for your fund, but when people ask us ‘can we put it on our wall’ the short answer is, ‘no you can’t.’”

Any investment for the purposes of a SMSF cannot contravene the so-called ‘sole purpose test’: it must only fulfil one purpose and that it is to provide a benefit on retirement. “And any investment that also provides any ancilliary benefit clearly fails the test,” says the ATO’s Frost.

Prominent Melbourne collector and art world accountant Tom Lowenstein isn’t taking the ruling lying down.

“I completely disagree with the Tax Office’s view and I’ve put a submission to them putting that case,” he told The Bulletin. “If the work has been bought for investment and fulfils the aims of the fund’s investment strategy then what does it matter where it is stored? My argument is the asset is just as safe on your wall at home as in storage, and is probably even safer.”

Lowenstein said cost of setting up even a small SMSF were not inconsiderable. With a modest investment of $100,000 “you’d still be looking at $2000 to $3000 in legal, accounting and auditing expenses. Add $5000 to $6000 per annum to insure and then store the works and you’ve probably wiped out any capital gains right there.”

Lowenstein argues, rather facetiously, that he is currently advising clients to either not hang their artworks, or to make sure they don’t enjoy them if they do. Which makes for a bizarre twist on an old adage: I don’t much about art but I know what I don’t like.

He predicts one of two outcomes to the controversy: “Either the ATO will back down, or it will be decided in the courts.”

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Abridged version published in The Bulletin

14 August 2003

Collectables: Emily Kame Kngwarreye

The market aand experts differ on the value of early and late works by the legendary indigenous artist, Emily Kame Kngwarreye.

Undoubted highlight of last month’s bumper Sotheby’s Aboriginal art auction was the sale of the late great Emily Kame Kngwarreye’s 1991 canvas, Untitled (Spring Celebration).

Bidding on this sensual colour field of green, brown and yellow dots was the most competitive at the 560-lot sale, with four bidders on the phone and several dealers and collectors in the room vying for the prize.

The hammer eventually fell for a Swiss private collector who bid $463,000 – more than three times Kngwarreye’s previous auction benchmark, one of 17 saleroom records set for individual artists at the $7.4 million auction.

But what’s in a record? Are we to assume that this work was the pinnacle of Kngwarreye’s extraordinary achievement?

“These aren’t her best works in my opinion,” says Emily expert, Margot Neale, curator of Kngwarreye’s landmark 1998 national touring retrospective – the first ever for an Aboriginal artist.

“They’re very beautiful and there’s a quiet poetry about these early dot paintings,” says Neale. “But Emily didn’t pick up a brush until 1989, when she was in her late seventies. These works are only two years into her [eight-year] career," said Neale, now director of the First Australians Gallery at the Australian National Museum in Canberra.

“In my opinion Emily really came into her own with those looser, more gestural works of 1993-94, when she put all her verve and passion into it.

"She had enormous physical strength in her arms and hands from a lifetime of camel-driving and in the later works she really gives vent to that physicality on the canvas.”

The market begs to differ. But then the market judged at Sotheby’s corresponding sale in 1995 that a similar work to the new record breaker, Flowers of Alagura 1991, was worth only $2,300.

Meanwhile works from what Neale (and others) regard as Kngwarreye’s best period are still going for more modest prices of around $30,000 and up. Canny investors might look to what is called counter-cyclical buying and snap up these bargains while they last.

But, again, for those that buy for money there is always a downside – they will eventually have to part with a work of art whose aesthetic value is priceless.

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Abridged version first published in The Bulletin

11 August 2003

Cox on Venice: Tear down my shack!

It's time for the Australian pavilion at the Venice Biennale to go, says the architect who designed it. Michael Hutak reports.
Prominent architect Philip Cox, fed up with snipes from the artworld, has declared he would support tearing down his "temporary" Australian pavilion in the elite Giardini della Biennale in Venice, the official venue for Australia's participation in the world's most prestigious artfair since 1988.
"I would be very pleased if the Australia Council or the Australian Government replaced that building because it is a temporary structure," Cox told The Age. "I am completely behind putting a permanent building there."
Currently occupied by Patricia Piccinini's critically-acclaimed suite of mutant sculptures, Cox's construction clings to a bank that falls away steeply to a canal, squeezed into a backlot behind the leafy, spacious environs enjoyed by the other 25 national pavilions. Australia was the last country to be granted a permanent pavilion.
Cox said the critics who "always moan about why we don't have something of the order of the French or the German or the English pavilions forget that it's a very cheap building put together in 10 minutes".
"They forget the whole project was virtually gifted to the Australia Council. We donated our services and we got BHP to provide the steel and Transfield to also provide materials. And on the record and to be perfectly frank, it gives me the f---ing shits considering we all worked so hard for nothing to put it there."
The 1988 Bicentennial project bears Cox's trademark prefabricated steel tubing, and might have made a luxurious split-level beach shack for a 1980s high flyer. But as a showcase venue for contemporary art, it routinely comes in for a biennial bashing as an almost unworkable space, one that dictates to the artist, not vice-versa. Wall space is cramped and large paintings are almost impossible to hang favourably. This year, Piccinini was praised for making best use of the difficult space by choosing to display three-dimensional work.
Cox concedes these criticisms, but says the artworld has short memories when it comes to the building's genesis. "The brief was - well, there wasn't a brief," he said. "The Venetians made it a case of either you fill the space quickly now or you'll miss out."
Cox then had a seat on the Australia Council's design board and realised that to be completed in time, the construction had to be prefab. The building permit was issued on May 25, 1988, and Arthur Boyd's show curated by Grazia Gunn opened less than a month later, on June 24. It then promptly closed for two weeks to allow builders to finish the roof, fit missing windows and repair the floor that had been covered by tarpaulin.
Several sources in Venice this year close to the Australia Council said official moves were underway to finally do something about the pavilion, however Australia Council chief executive Jenny Bott confirmed that the venue would remain unaltered for the 2005 Biennale at least.
"We need to develop a 10- year strategy for Venice," Bott said. The council spent around $900,000 on this year's Venice adventure, but Bott said "any capital expense would never come out of our budget".
However the Australia Council's temporary lease over the treasured block this year moved to permanent status, clearing the way for a complete rethink of the building.
In alternating years Venice's Architecture Biennale consumes the Giardini. However the Australian pavilion remains mothballed because, says the Australia Council, "architecture does not fall within (our) brief".
Under moral rights amendments in 2000 to the Copyright Act, any substantial changes to the pavilion would have to meet with the architect's approval.
Cox says he hasn't been approached by the Australia Council but would nevertheless give his imprimatur to a new, more suitable structure.
"I would love the opportunity to design it," he enthused, "but you'd need $10 million to do something decent and where would you find that sort of money for a single arts project in Australia today?"
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First published in The Age

7 August 2003

Collectables: Cricket Tragics

Is Don, is not so good: Legend drives the market for items with a direct and personal connection to Don Bradman during his playing days

Nostalgia aint what it used to be – today it’s big business, especially if your name was once Bradman.

Like an artist who must expire before his works soar in value, the Don’s passing in March 2001 has ushered in an era of record prices for collectibles at one end of the scale, and rapacious trading of memorabilia at the other.

Christie’s London set the benchmark in June when Bradman's baggy green cap from the 1946-47 Ashes cricket series attracted a record auction price of AUD$88,835. And last month the prodigy’s most famous ‘baggy green’, worn in his final innings in 1948, was sold privately for an unconfirmed $425,000.

Christie’s Australian head of decorative arts, Richard Gordon, says the July sale should not be cited as a new benchmark for the Bradman market simply because it was so unique. “Given that he may have never had another chance to buy it, it was clear the purchaser was prepared to go to great extremes,” says Gordon. “It now seems very unlikely to come onto the market again in the near future.”

Gordon acknowledged that the market for such genuine collectibles – items that had a direct and personal connection to Bradman during his playing days – was being driven by the legend that has built up around the Don.

“These items are steeped in such history and the man himself seems to generate such divided passions in people – he is not universally loved.”

Tell that to the purveyors of the burgeoning market in mass produced memorabilia and limited editions. Bradman’s attempts to devalue his signature by flooding the market – it is well known he would sign anything put in front of him in an effort to ‘decommercialise’ it’s significance – has done little to dull the appetite of cricket fans for anything vaguely associated with their hero.

A random search at online auction house EBAY found 124 Bradman items up for grabs ranging from a signed bat - starting reserve $9,999 and purchased from “a close friend whose grandfather was said to have known [the late] Clarrie Grimmet,” - to a used 1996 paperback on the Don, asking price $2.

In between one can bid on still more bats and books, plus stamps, coins, posters, pewter and porcelain figurines, trading cards, coasters, balls, audio tapes, videos - even a “very rare” fork and spoon set.

Just $150 will open the bidding on a shop-soiled entry ticket to the Australian’s tour match against Surrey in 1934. Bradman made 61 not out that day. Talk about tragic.

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Abridged version published in The Bulletin