tax matters for the arts - lowensteins

LOWENSTEINS ARTS MANAGEMENT NEWSLETTER APRIL 2015 :1

Tax Matters for the Arts

In February this year a high-powered delegation of interests representing the commercial art sector, including partners from Lowensteins Arts Management, attended a meeting in Canberra with the Attorney-General and Minister for the Arts, Senator the Hon George Brandis, and Assistant Treasurer, the Hon Josh Frydenberg.

The meeting focused on the arts industry’s concerns about the lack of action that the Government has taken in relation to the restrictions on Self Managed Superannuation Funds (SMSFs) from purchasing art work.The meeting produced some good outcomes: the Government understood the problem and promised Treasury would do further research into the effects of the removal of the New Regulations on the Budget’s bottom line. Members of the delegation believe that the Government is now more aware of the concerns of the commercial art sector. Changes may be

afoot that will relax the restrictive regime that exists at the moment in relation to the future for SMSFs to purchase artwork as a legitimate investment.The meeting was the climax of lobbying done on behalf of our firm with Tom Lowenstein spearheading the Save Super Art Campaign to seek some redress to the legislation and it represented a great achievement for the visual arts to have had not one but two Cabinet ministers present to hear the concerns of the industry.You can read the submission on The Australian Art Market and the Arts Industry 2015 that informed the meeting on page 4.

Our recommendations • The repeal of the Superannuation

Industry (Supervision) Amendment Regulations 2011 (No 2), referred to as ‘New Regulations’ which were introduced and effective from the 1st of July 2011. If the repeal of the legislation cannot be effected immediately due to time factors or technical necessity, we request a deferral of the compliance

deadline until the repeal of the New Regulations.

• Re-define the ‘sole purpose’ test because the current narrow interpretation by the ATO is not in line with international opinion. Australian investors would be ridiculed by the international art world, if it was revealed that, in effect, a SMSF could acquire a work of art but members of the fund would be prohibited from viewing the work, as the pleasure of looking at it would convey a ‘benefit’.

Of course it remains to be seen what the Government will do about amending the New Regulations and the timing of such action.With the arts industry experiencing a period of decline, it would be a welcome boost to have these changes made to SMSFs. We await the outcome and will inform our readers of any developments.

www.lowensteins.com.au APRIL 2015Tax Matters for the Arts

Issue Highlights:Lowensteins meet with Ministers

Colin Lanceley 1938 - 2015Work-related expenses

Lowensteins meet with Ministers

Metamorphosis, 1988, by Peter Schipperheyn cast bronze from marble original on marble base, 87.0 x 38.0 x 13.0 cm overall, edition 1/9


For two years, illness prevented Colin from working in his studio at his Surry Hills home. But his lifelong creative fire still burned and he was desperate to get back to work, “I have so many things that I want to say as an artist. Art is very fundamental to being alive, somehow”.

Former National Gallery of Australia director, Betty Churcher, paid tribute to Lanceley as an important artist and a wise and valuable member of the gallery’s board in the 1990s.Lanceley had broken “absolutely new ground” as a young artist in the Sydney art collective known as the Annandale Imitation Realists. Gemini and The Dry Salvages were honoured with a special exhibition at the Art Gallery of NSW in 2001.Australian Galleries director Stuart Purves, who represents Lanceley, said the artist’s work was characterised by a profound intelligence.“My last words to Colin were that his place in history is assured through his originality and brilliance,” Purves said.“He really brought something to us that was new and original.”Throughout his distinguished career, Lanceley garnered the respect of collectors and senior curators.He was a passionate and outspoken activist for the ultimately successful campaign to retain the studio-based orientation of the National Art School in Darlinghurst, where he had studied as a young man.

After winning the Helena Rubinstein Travelling Art Award in 1964, Lanceley lived all over the world. Lanceley exhibited at the prestigious Marlborough Gallery in London. This international recognition gave his career an enormous boost. He returned to live in Australia in the 1980s.Lanceley was a brilliant innovator. He was fascinated by the past lives embodied in discards. His joy was to find objects such as fragments of disused agricultural implements, and to fix them to his paintings to give them three-dimensionality. He was also known for his drawing and printmaking. Colin was awarded an Order of Australia in 1990 and received an Australia Council Creative Arts Fellowship in 1991.

His work is held by the NGA and most state galleries. Internationally his work is held in public collections in the United States and Europe, including the Tate, the V&A, MOMA and the Guggenheim Museum in New York.Lanceley is survived by Kay and their sons Felix and Tristan.Elizabeth Fortescue, The Daily Telegraph, January 30, 2015 extract reproduced with permission of News Corp Australia.

Colin Lanceley 1938 – 2015

Senta Taft-Hendry 1924 – 2014Senta opened Galleries Primitif in 1959 at a time when Aboriginal art consisted of bark paintings and artefacts and little was known about the cultures that she visited on her collecting trips. Together Senta and her closest friend of 30 years, Leo Fleishmann, who managed the gallery, collected and documented works that adorn galleries and major private collections around the world.Senta loved and believed in the dignity of the Aboriginal and Pacific Islander

peoples she met. Many elders went on to become lifelong friends as she joined them in their struggle to keep their ancient cultures alive. She collected for over 50 years during which time she presented her acquisitions, not as art as we know it but spiritual and mystical objects, made for the purpose of perpetuating and placating the ancestors of their creators.Senta donated more than 200 pieces to the University of Newcastle. Thousands more adorned the walls of her gallery and her home and the ‘lake house’ at Valentine (also gifted to the University). A memorial fund in Leo Fleishmann’s name

at the Australian Museum was established by Galleries Primitif to further studies in Pacific Arts.Senta, the grand doyen of the ethnographic trade, is survived by her husband Dr Peter Hendry and family. Adrian Newstead is the owner of Coo-ee Aboriginal Art Gallery and author of The Dealer is the Devil – an Insider’s History of the Aboriginal Art Trade, Brandl & Schlesinger, 2014

South Coast, 2008, by Colin Lanceley oil and polychrome wood on canvas, 15.0 x 180.0 cm


Christopher Columbus would have achieved nothing without sponsors! Even back then, “money” drove the magnitude of one’s endeavours. A healthy imagination will develop your dreams and, if you believe in nothing else but yourself (as did Columbus), a fulfilling life may follow.I resigned from my last employer in 1984 and have never really worked for anyone but myself since. In essence I retired from my own marine companies in 2000 when I bought a helicopter equipped, 36 meter expedition ship “Sir Hubert Wilkins” with support from Dick Smith Foods.

Currently I am best described as a ‘Treasure Hunter’. For 250 years Spanish Galleons voyaged across the Pacific

between Acapulco and Manila in the Philippines. Each ship loaded with about $500,000,000 in gold and silver. It was used to trade for Asian antiquities, jewellery, silks, ivory and ceramics which were sailed back to Acapulco, then by mule train across the isthmus to load on ships for the voyage across the Atlantic to Europe.

In 2010 while preparing to sail my “Talisker Bounty Boat”, a 7.5 meter open whaler from the Kingdom of Tonga, 4000 miles to Kupang in West Timor (following in the footsteps of William Bligh after the ‘Mutiny on the Bounty’), I heard rumours about old wrecks and gold around the islands.

So began my current “Blue Treasure” expedition after a “galleon” we believe is

in the area. We live on our own tropical island or on our dive support boat “ICE”.

Fortunately 30 years ago, Tom Lowenstein came into my life! His team has been a truly important part of the adventure ever since. Big dreams cost big dollars! The only advice I never took from Tom was to concentrate on one thing at a time! For the past 10 years my immigration forms show “DEVELOPER” as I always try hard to develop my dreams into reality: “solo round the world sailor, world record gyrocopter pilot, property developer, rally car racer, Antarctic colonialist?”.

If you want more, see www.McIntyreAdventure.com

Don McIntyre: Treasure Hunter

Article & Photos © Don McIntyre

Tidal Almanac: The Warming of the Seas, 1988-1990 by John Wolseley watercolour, gouache, and coloured pencil on paper, 162.0 x 247.0 cm


Submission to Government: The Australian Art market and the Arts Industry, February 2015Since the GFC the art market has been severely depressed.

• Sales in the primary market have greatly decreased. Approximately 30% of Commercial Galleries have closed or merged, reducing the availability of galleries to show artists’ works. Altogether, there is a lack of confidence and a general feeling of pessimism.

• Many artists have suffered a severe reduction in sales and it has left many of them depressed and forced onto Centrelink benefits.

• The secondary art market has also shown a substantial decline in turnover, from $175 million in 2007 to just under $100 million in 2014 (a 40% decrease).

• During the same period, the Aboriginal secondary art market has plunged from $28 million to $5.6 million (an 80% fall) and the average Indigenous-owned art centre’s income has halved.

Reasons for the declineWhilst it is generally acknowledged that the GFC was responsible for the initial downturn, the rest of the world has recovered, whilst the Australian art market has not.The Australian creative arts economy has been devastated due to the former Government’s introduction to the ‘New regulations affecting the ability of Self Managed Superannuation Funds’ (New Regulations) in 2011 that regulate acquiring art as an investment.

Self Managed Superannuation FundsThe New Regulations affecting art storage, insurance and administrative costs make it virtually impossible for financial advisers to recommend the acquisition of art to trustees of SMSFs because there is uncertainty and confusion surrounding these New Regulations. The transitional period expires this year, so a major concern for members is the requirement to comply with the New Regulations by June 2016 or the Funds will become ‘non-compliant’.Galleries and dealers have confirmed that since the New Regulations were introduced, the acquisition of art by SMSFs has completely dried up due to the uncertainty.

This situation will be exacerbated by the additional requirement for all SMSFs to comply with the New Regulations by 30th June 2016 in relation to artworks acquired prior to their introduction.Trying to dispose of $600 to $800 million worth of artworks in such a short period of time would destroy the Australian art market and depress artists prices which would undermine the viability of the commercial art sector for decades.

Observations• In 2010 the Cooper Committee’s

Review Into Superannuation regarded the acquisition of art by SMSFs as a ‘pastime of the rich‘ and suggested that the only reason for superfunds to buy art was to get a tax deduction for it.

• In reality, the process is quite different: A taxpayer will put the maximum funds available into superannuation and it is a result of this transaction that they receive a tax deduction. It is only once these funds are in the SMSF Bank Account, that the trustees decide where to invest these funds. If they desire, they can invest the funds into property, shares, art or any other eligible investment. This freedom of choice is one of the basic principles of Liberal philosophy.

• The Superannuation Act was designed to prevent SMSF members gaining a current benefit from an investment in collectables and personal use assets and to ensure that SMSF investments are made for genuine retirement income purposes. It is our view that there is no impediment to superannuation funds investing in art provided it falls within the investment strategy laid down by the trustees of the fund; and also provided that the investment meets the guidelines of sound business principles. Hanging a painting on a wall and deriving pleasure from it is purely an incidental benefit which does not differ from the pleasure a person derives from looking at property that has been acquired by a SMSF. The question of whether hanging artworks on the wall of members or associates creates a breach of the ‘sole purpose’ test - which is the view of the ATO - has never been tested in court.

• The introduction of the New Regulations, especially the storage and insurance rules, and the ramifications of the June 2016 compliance deadline have created such uncertainty that no financial advisor will recommend buying art in SMSFs.

• It is perhaps ironic that the New Regulations require that a work of art has to be insured within 7 days of purchase.

• These insurance requirements for artworks are specifically spelt out, whereas there is no such matching requirement in relation to insuring a property owned by the SMSF.

It is difficult to reconcile that art, which is an industry that is alive and vital and is continually creating and manufacturing new products, is put into the same category of ‘collectable’ as the following: antiques, jewellery, coins, stamps, wine and spirits, motor vehicles, boats and membership of sporting or social clubs.It is important to note that the arts generates economic activity and tax revenues, both in GST and income tax. These economic factors should move the Government to act to remove these impediments as these changes will not only be revenue neutral but can have a positive effect on the Budget’s bottom line.

Conclusion What was the Government trying to achieve?It is perplexing to understand the purpose of the New Regulations and what the former Government wished to achieve.We know that what has been achieved is a dramatic collapse of an exciting industry which has affected the livelihood of thousands of artists, gallerists, art suppliers, framers, freight and shipping agents, advertisers, magazine publishers, dealers, consultants and others associated with the industry.We believe that the art industry is vital to the health of the Australian creative community and the image of Australia abroad.


by Evan Lowenstein

BackgroundAfter we wrote about Travel Allowances in the December 2014 Newsletter, Lowensteins held a meeting with the ATO to discuss the proper treatment of ‘Travel’ and other expenses such as clothing, technology and other work-related costs.Over the past year the ATO has been focusing its attention on taxpayers claiming expenses that, according to the ATO, are way outside the norm. Most of these taxpayers seem in be in areas of our speciality, being performers and back stage technical crew. We have seen a fair amount of audit activity on our clients which has led us to publish some guidelines about the correct treatment for claiming expenses. It will come as no surprise to you that in the economic environment of a cash-straightened government, the ATO is looking very hard at revenue-raising and sees these claims for travel and other work-related expenses as ‘low hanging fruit’ to be clawed back into their coffers.It is now taking a very literal view of ‘expenses’.The targets seem to be:

• employee travel claims

• use of technology • use of conventional

clothing if used by performers, models etc.

TravelTo recap: If the employee is receiving a travel allowance from their employer, then in order to claim more than the allowance, full substantiation of their expenditure is required in the form of receipts, bank statements and credit card statements.If they are receiving what the ATO say is a ‘tax free’ travel allowance, then no claim can be made.Tax free allowances are not shown on the employee’s payment summary.

What this meansYou are no longer entitled to an automatic deduction of the reasonable daily rate for travel.You must show proof of spending on travel and this must consist of receipts, some bank statement withdrawals, credit card vouchers and diary notes.

Use of TechnologyMost taxpayers use mobile phones, internet and electronic devices as their tools of trade.Some taxpayers claim only a percentage of their costs as work-related which is the prudent way to adhere to the law. But the ATO are taking a hard line on people who claim the use of these items and require evidence of how this business percentage was established. They can also request letters from employers.The ATO requires the taxpayer to keep a log for a month, showing the business calls vis a vis the private calls

to establish a work-related percentage. We will encourage and urge our clients who wish to claim these costs, to keep such a log for a one month period.

ClothingMany of our clients are professional models and performers who often use conventional clothing as part of their work-related expenses.From our meeting it appears as if the ATO intends to scrutinise claims of ‘conventional clothing’ with a view of disallowing the claim.This is based on some court decisions. Although we disagree with their interpretation, it is prudent to seek some third party evidence for the need to purchase clothing in order to be able to perform the duties be that of a performer or model. This evidence may take the form of a letter from the modelling agency and/or production companies when they engage your services.We intend to request a private ruling from the ATO to clarify this issue and we will inform you of any developments.In addition we will be sending out letters to those clients that we think might be affected by this new approach with a view to better informing our client base on substantiating their legitimate claims for expenses.

Evan’s corner: Work-related expenses

The Boat Race, 2007 by John Olsen gouache on paper, 29.0 x 42.0 cm


As reported in the SMH on 31 March 2015, ‘prospective art buyers can take out an interest-free loan facilitated by the 10 Group’s Art Money for works priced from $750 to $20,000 – they put at least 10 per cent down to secure the artwork ($2000

on a $20,000 work, for example, or $75 on a $750 piece) and then pay the rest off in nine equal monthly instalments. The buyer gets to keep the work from the moment they make their first payment.’See https://www.artmoney.com

Sydney Council’s Art Loan scheme launched Lowensteins Arts Management P/L Certified Practising AccountantsABN: 63 095 459 439ACN: 095 459 439

Melbourne Level 5 / 574 St Kilda Road Melbourne VIC 3004PO Box 6853 St Kilda Rd Central VIC 8008

T + 613 9529 3800 F + 613 9525 1616 E [email protected]

Tom Lowenstein Partner Evan Lowenstein Partner Adam Micmacher Partner

Sydney Suite 601 / 3 Waverley Street Bondi Junction NSW 2022

PO Box 651 Bondi Junction NSW 1355

T + 612 9389 2400 F + 612 9389 6506 E [email protected]

Tom Lowenstein Partner Adam Micmacher Partner Michael Zillig Partner

ImportantReaders should not act solely on the basis of the material contained in this newsletter. Items herein are general comments only and do not constitute or convey advice. Changes in legislation may occur quickly. We therefore recommend that formal advice be sought from one of our offices before acting in any of the areas covered in this newsletter.

Tell us your news Please send us your news of upcoming exhibitions, workshops & opportunities. Space permitting we will publish your news in our next edition.Next Edition Deadline : 30 May [email protected] Copyright © LAM & the artists & authors 2015 Newsletter design by Web Prophets Pty Ltd

In our next issueBudget issue

Tax matter for the arts ISSN: 2204-0307

Storage Space RentalIn order to assist clients and friends of our firm we have taken storage facilities in Oakleigh in excess of our requirements.This would be attractive to Trustees of Self managed Superannuation Funds and complies with the storage requirements of the regulations.The following spaces are available:Carrels for the upright storage of artworks:

- Single carrels: 145 cm high x 20 cm wide x 135 cm deep- A total of 38 carrels available

Shelves for upright storage of smaller works / small sculptures / ceramics and /

or flat storage of unframed works:

- Single shelf: 40 cm high x 190 cm wide x 70 cm deep- A total of 3 shelves is currently available

Storage of sculpture and other 3D objects – by negotiation.The storage space is fully secured and alarmed. Access to the space is by arrangement with either Tom Lowenstein, Evan Lowenstein, or Eugene Barilo von Reisberg. 24 hour notice is preferred, but same day access can also be arranged.

Mr Patrick Corrigan AM has been appointed to the Board of the National Portrait Gallery of Australia in recognition of his strong support for the arts, including making significant donations of artworks and serving on numerous governing boards. His business skills and leadership in the field of philanthropy will be an asset to the National Portrait Gallery Board.

AppointmentsArt event Gold Coast Art Centre hosted benefactors at Niagara Galleries on the 5th of March 2015, at a dinner for its’ perpetual benefactors of which Lowensteins has donated many art works from it’s collection.The dinner was hosted by Pat Corrigan AM, Chairman of the Gold Coast Art Gallery, Kerry Watson, Chairman of the Gold Coast Art Centre and John Walsh, Director of the Gallery.

Caroline Rook, Bill Nuttall, Rick Amor, Megan Williams, Mr Kerry Watson and Anne Clarke

Adam Knight and Ken McGregor Pat Corrigan and Tom Lowenstein

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