Crikey spent two hours in a small room with a bunch of Aboriginal ‘art market professionals’ last week listening to two staffers from the Copyright Agency Limited (CAL) set out the immediate future for the Aboriginal art market under Peter Garrett’s arts resale royalty scheme.
Garrett’s scheme under the Resale Royalty Right for Visual Artists Act 2009 commenced on Wednesday last week and requires that anyone selling visual artwork provide information — photos, unique identifiers (internal identification codes, etc), details of the artist and the work, etc — to CAL, even if that artwork will, at the first sale, sell for less than the $1,000 that would trigger the payment of a 5% royalty to the artist.
I’ve examined this scheme in the past here and here and those at the pointy end of the Aboriginal art market — the managers of the remote art centres, the small dealers and galleries and the auction houses and big-city galleries that deal in the fine-art end of the market — are still saying that the scheme will prove to be an administrative nightmare and a financial disaster.
And what about the Aboriginal artists whose artistic and commercial welfare Garrett trumpets as a primary justification for the scheme? Well, according to the consensus in the meeting and industry members that I’ve spoken to over the past weeks and months, few of the artists know anything about the scheme and its supposed benefits, and even fewer of them will ever receive any substantial benefits from the scheme.
The two staffers from CAL giving the presentation in Alice Springs appeared just as confused about many of the finer elements of the scheme as the 50 or so ‘art market professionals’ listening to them.
The CAL staffers opened with a couple of firm reminders to their audience that the resale royalty scheme was now the “law of the land” and that they would not enter into discussions on the policy behind the legislation — they were there to talk about the mechanics and administration of the scheme.
But many in the audience were confused and angry about the lack of consultation with them by Garrett and the sparse, and very late, information about what is a very complex scheme — and the effects that it would have on their businesses and the artists that they work with.
Confusion and anger in the Aboriginal arts industry about this scheme runs far beyond the small group of industry insiders in Alice Springs — the small dealers, “carpetbaggers”, flash downtown galleries and the remote Aboriginal arts centres that I’ve spoken to say the resale royalty scheme could knock the stuffing out of their businesses at precisely the wrong time.
The Aboriginal art market — and the many small arts centres at its core — has been doing it tough for some time.
Cecilia Alfonso, manager of the Warlukurlangu Arts centre at Yuendumu, 300 kilometres north-west of Alice Springs, told Crikey: “Peter Garrett has recently announced increased support and funding for arts centres across the NT and for that he should be applauded. But for Warlukurlangu and all the other small arts centres the resale royalty scheme will add another layer of meaningless bureaucratic bullsh-t that couldn’t come at a worse time.
“The Aboriginal art market has been flat for the past two years because of the global financial crisis, and our communities have been shattered by the double-whammy effect of the federal government intervention and the shires amalgamations by the NT government. If Peter Garrett thinks this will help Aboriginal artists then he couldn’t be more wrong, and this scheme will do nothing to address the very real problems created by the carpetbaggers and other scumbags that prey on Aboriginal artists right across the Northern Territory.”
And the storm created by the resale royalty scheme could soon link up with another “super cell” looming on the horizon.
In late April the federal government released part 3 of the Cooper Review into Self-managed Superannuation Funds (SMSFs), the latest in a series of papers commissioned by Attorney-General Robert McClelland. Jeremy Cooper was briefed to examine the governance, efficiency, structure and operation of Australia’s superannuation system.
Page 33 of the third Cooper report contains the following “preliminary recommendation”:
The Panel recommends that:
- a) the acquisition of collectables and personal use assets by SMSF trustees be prohibited;
- b) SMSFs that own collectables or personal use assets be provided a transitional period up to 30 June 2020, in which to dispose of those assets; and
- c) APRA‐regulated funds be exempted from these changes.
There is limited discussion in the Cooper report of the rationale behind the proposed exclusion of these “collectables and personal use assets” that wouldn’t make much sense to anyone not versed in the arcane language of superannuation and its regulation, but Cooper notes that they include items such as “paintings, jewellery, antiques and stamp collections and wine, exotic cars, golf club memberships, race horses and boats”.
It is the reference to these so-called ‘passion assets’ that has caught the eye of more than a few in the fine art end of the Aboriginal arts industry.
Susan McCulloch is the co-author of the Australian arts industry ‘bible’ McCulloch’s Encyclopeadia of Australian Art and, as reported in an editorial on the Artabase site last week, she says Cooper’s recommendations will be devastating for the Aboriginal art industry:
“Take $100 million a year away from the Australian art market, and the effects will be devastating for visual artists, suppliers, indigenous communities, and small businesses. The most significant impact is likely to be on Aboriginal artists and their communities whose livelihood will be severely and immediately affected.”
And there may be all manner of other unintended consequences if Cooper’s recommendations are implemented. Suzie Spira is a director of a Sydney gallery and committee member of the Shalom Gamarada Indigenous Scholarship Program that runs an annual selling exhibition of Aboriginal art at the University of New South Wales, the proceeds of which fund scholarships for indigenous medical students in 2009.
“The annual Shalom Gamarada Ngiyana Yana Aboriginal Art Exhibition has, since it began in 2005, supported around 24 indigenous students to study medicine, optometry and medical science at UNSW.” she said. “Around 30% of the sales from the exhibition have come from self-managed super funds and if the Cooper recommendations are implemented it may seriously threaten the ongoing and essential support we provide to these students.”
Spira told Crikey of the unintended, but very foreseeable, effects of Cooper’s recommendation that SMSFs with a portfolio of Aboriginal art dispose of those artworks within 10 years:
“This will be absolutely disastrous for the broader market in Aboriginal fine art. This would lead to the dumping of a large number of high-quality works into a depressed market in a very short time — that would drive down the value of those works and also affect the production of new art. And anyway, what business is it of the government to tell people what is — or what is not — a good investment?”
And as this super industry ‘roundtable’ discussion moderated by Ian Glenister of industry legal advisers Glenister & Co illustrates, the Cooper recommendations may be a very big hammer to crack a very small nut, with art holdings by SMSFs representing about 0.01% of their total holdings.
Crikey contacted the Association of Northern, Kimberley and Arnhem Aboriginal Artists Inc for comment but they didn’t get back before deadline.
I agree with what Bob Gosford says here and would like to add some commentary. To begin, I wonder why Desart and ANKAAA as artists representative organisations were not at the forefront of a campaign to inform the well-intentioned minister and his department about the reality in remote Australia where much Aboriginal art is produced. Of course everyone would like to see relatively poor artists get more, but will a 5% tax on the imagined [super?] profits from the secondary resale of commercial outlets, arts investors and afficinados alike make a difference?
Consider the following. The backbone of the Indigenous visual arts sector remains community-controlled art centres. Many buy art outright for the best price possible from their members who need cash up front and then sell retail or wholesale. That initial purchase apparently constitutes first change of ownership, so the artist’s own cooperative that has already paid the artist once now has to charge and pay another 5% when it onsells an art work from one of its members. It appears that this will need to be done via CAL in Sydney, so 5% gets forwarded to CAL who then return the 5% minus an administrative fee of 10% of the 5% back to the art centre to locate and deliver to its member. Looks very clumsy and why should CAL get 10% and the art centre nothing to cover administrative costs? This initial problem will be overcome if art centres only buy works on consignment or if they do an informal deal with artists to make up front payments of $999, ensuring no transfer of ownership and returning a second payment later when the art work is sold. If such measures were adopted, the administrative burden is just passed onto commercial galleries and other art retailers.
What is equally concerning in my view is the governmentality of artists embedded in this scheme because now under Australian law all sales need to be publicly recorded on a public website. I assume that this will be done with identification of individual and date which seems to be an infringement of an artist’s right to privacy, as well as a form of transparency that has the potential to increase the ‘humbugging’ that a sophisticated state machinery has been created (at massive public cost) to ameliorate. It should be noted that the 5% to be returned to an artist is gross so could be far less net of income tax, while the 5% tax to be paid by a profit making seller does not take into account capital gains taxation that might also be payable. Interestingly, unlike the miners, art buyers will not be provided a proposed 6% profit buffer nor a rebate if they make an arts loss, in other words, secondary sales that are for less than purchase price will still attract the 5% resale royalty on resale price, not net profit!
In this case the policy reform sentiment and ideology may be faultless, but the implementation and unintended consequences are poorly considered, there is an absence of risk assessment and an absence of deep on the ground consultation with key stakeholders who will be affected. It beggars belief that these relatively straightforward implementation issues were not considered and addressed before the new law came into force last week. This is not evidence based policy making, but it is policy making that will adversely affect those it is intended to assist, relatively impoverished artists. Ultimately, a comprehensive consultation and risk assessment would have looked to examine both such micro-implementation problems as well as macro arts sector impacts. A combination of the clumsy adoption of a resale royalty scheme at a time when the market appears to be dipping alongside rumours that self managed superannuation funds might be forbidden from investing in visual arts could have adverse impacts for most that will more than offset the 5% resale royalty for some. Paradoxically, it is unclear why visual arts might be excluded from SMSFs given that a ‘super profits’ resale royalty scheme is simultaneously deemed necessary.
Good policy making requires much hard work, especially in areas such as the visual arts, taxation, remote Australia and Indigenous affairs, all areas where the Rudd government is struggling. Unfortunately all these areas are rolled into one in the well-intentioned, but potentially harmful, resale royalty scheme for visual artists.
“….. wonder why Desart and ANKAAA as artists representative organisations were not at the forefront of a campaign to inform the well-intentioned minister…..”.
Whilst I don’t know the answer in this specific case, I can tellyou a bit of what is happening in remote Aboriginal Australia.
Today in Yuendumu there has been an L.A.B. meeting. The Local Advisory Board advises the Central Desert Shire that seized the assets of the Yuendumu Community Government Council when the numerous community councils were amalgamated into super shires (the size of some European countries!). Our local Council is now effecrively “run” from Alice Springs.
Tomorrow there is an L.R.G. Local implementation Workshop. The Local Reference Group is alleged to have prioritised the L.I.P. for the R.S.D. (Remote Services Delivery).
If we don’t turn up we are accused of not being interested and we don’t get to keep an eye on their machinations. If we do attend we are used as proof of real consultations having taken place. We are all suffering “meetings fatigue” and on occassions will give grudging consent just to stop the onslaught.
We are expected to drop everything and turn up at these meetings. All the public servants, consultants, advisors and politicians are well paid and well resourced (they come in shiny new Toyotas or charter planes) and there is many of them.
Very rarely are local people listened to at these meetings, workshops and consultations. Many don’t bother to attend.
Maybe Desart and ANKAAA are faced with a similar brick-wall.
RESALE ROYALTY IMPLEMENTATION DEBACLE FOR THE INDIGENOUS FINE ART INDUSTRY
• Lack of proper Consultation with private sector of the Indigenous Fine Art Industry
• Galleries/Dealers required to send full details and even images to CAL (Copyright Agency Limited) of all original artworks/artefact sold even if they sell for just $100
• Resale Royalty takes no account of Indigenous Art structure with its unique wholesale/dealer framework
• Indigenous Artists to lose work and their main form of independent income
• Counter to the reasoning behind the Resale Royalty Scheme, the majority of Indigenous Artists and Craftspeople will be adversely affected.
• Rushed and botched Legislation and implementation mean CAL Information Seminars actually take place some two weeks after its implementation – most unaware of their new obligations
• Draconian fine of $110,000 for a single breach, even though most are still unaware of their obligations due to lack of and patchy Industry promotion
• Galleries forced to pay a royalty on their framing costs and on GST
• Commercial in confidence information could be available to all and sundry
• Resale Royalty must be paid even where a painting is sold at a significant loss
Unfortunately, it would appear that the Rudd Government has botched a very important piece of legislation in part due to its erstwhile rush to provide an equitable system where Artists benefit from the appreciation of their original artworks over time. The peak body for all sectors of the Indigenous Fine Art sector, the Australian Indigenous Art Trade Association (ART.TRADE) has long supported the concept of a secondary resale royalty programme and indeed it is part of our Constitution. However, in stark contrast to the new Indigenous Art Code of Conduct (COC) (which is voluntary), this compulsory Resale Royalty scheme is severely flawed due to its lack of consultation with the very people and businesses who will have to implement and administer the scheme. Peter Garrett is glibly telling all who will listen to “jump on board!”. However, those whose livelihoods depend on this Industry have no desire to jump on board this train wreck to nowhere. When will this Government learn the lessons from the Mining and Insulation sectors and actually listen to the advice of those in the know. This could have been a triumph embraced by virtually all within the Industry just by following the simple consultation route, but no, apparently the bureaucrats no what’s good for us even though most have never been Artists or run their own small business.
The voluntary COC was extensively discussed and workshopped throughout Australia which enabled a system that the vast majority of the Indigenous Fine Art Industry would feel comfortable in subscribing to as most of the problems and impracticalities had been identified and addressed. However, with regard to the compulsory Resale Royalty, not only has there been no consultation with the majority of the private sector of the Indigenous Fine Art Industry, but most are still unaware of its impending implementation.
This flawed legislation takes no account of the unique structure of the Indigenous Fine Art market. With its contentious “First Sale Trigger Point”, this legislation means that a resale royalty becomes payable if there is an agent or dealer between the Artist and the selling Gallery or even where the Artist sells directly to a Gallery. This is usually the case given that most Artists reside in very remote areas. In effect, this could well mean that a royalty could be triggered twice before it even reaches the Exhibiting gallery.
The private sector comprises at least 60% of the Indigenous Fine Art Market and is often the preferred route for Indigenous Artists to promote and sell their artworks. This may be due in part to the relationship that they have with their Agent/Dealer and their good contacts, but it is also due to the fact that the private sector invariably pays for artworks upfront (these transactions are governed by best practice under the COC). However, the new legislation means that Agents will be disadvantaged if they choose to pay up front for an art work. Nearly all Indigenous Artists prefer to paid up front for their paintings/artefacts, but the clumsy legislation means that many Agents/dealers will have no choice but to obtain these artworks on a consignment only basis if they are to compete on an even playing field. Clearly, this drying up of cash flow to Indigenous Artists will have a deleterious effect upon Artists and their often extensive dependents.
As it stands, Agents already take a big risk in purchasing artworks up front as there may be no ready buyer and thus no return on their investment and as Artists are aware, money up front is worth more than a promise to pay once or if the painting is sold. Both Artists, Agents and galleries stand to lose with the current structure of this poorly conceived legislation. These up-front payments are an integral part of the Indigenous Art economy and this valuable income forms the vast majority of their independent income.
One of the more onerous requirements of this ill conceived legislation, is the requirement to notify, list all details and to provide an image of all sales of all artworks to CAL even if the artwork/artefact falls beneath the $1,000 qualification limit. Several ART.TRADE members have complained strongly about this requirement due to the incredible amount of time, resources and administration that this unprecedented demand will place upon their businesses. As an specific example, one of our members based in Alice Springs sells on average 13,000 paintings per year of which, 11,000 paintings sell beneath the $1,000 resale royalty threshold at an average price of around $100 – $200. Unbelievably, this member is expected to report all of these 11,0000 sales and submit photographs, Artist details and description for each and every one of these works even though conceivably they will never reach the $1,000 resale royalty threshold. Currently, this Gallery does not even photograph these artworks as it isn’t economically viable to do so.
Clearly, these artworks will become completely unviable to this and every other gallery on June 9th when the resale royalty requirements come into effect due to the onerous reporting requirements costing more than the paintings value. Many of these paintings are tourist pieces often by lesser known Artists and this income is their only independent income. These Artists will be adversely affected and put out of work by this ridiculous and unnecessary reporting requirement. This onerous and cumbersome reporting requirement needs to be abolished immediately as a matter of urgency before Indigenous Artists lose their jobs and their income.
Whilst the Government has partly avoided a retrospective element to the legislation by stipulating that works purchased before 9th June, 2010 are allowed to be sold once before triggering a resale royalty, this again ignores the unique structure of Indigenous Fine Art where many original artworks have already been purchased by Agents/distributors and dealers (essentially wholesalers), as the selling gallery or the next person in the chain will incur the royalty.
The Government needs to acknowledge the very real and relevant differences between the Western and the Indigenous Art markets. Whilst a western Artist may be liable for framing, invitations, exhibition expenses and refreshment costs, traditionally all of these expenses are borne by the Exhibiting gallery with regard to Indigenous Exhibitions. However, this approach means that the exhibiting Gallery will have to pay a royalty to the Government for their framing costs! Unlike the general retail industry, most galleries and businesses within the Indigenous Industry are very small enterprises of just one to two people operating on a commission basis of between 20% – 40% from which all costs such as wages, rent, rates, utilities advertising invitations and Exhibition cost must be met.
I urge the Government to push the pause button on the implementation of this flawed legislation (with regard to the Indigenous sector) before incredible damage is done to this fragile Industry and to the very Artists that the Government is seeking to enfranchise and for the Government to immediately consult widely so that a workable framework can be established and embraced by all within the Indigenous Fine Art Industry.
This ad hoc approach of “one size fits all” to an important Industry reform displays a complete lack of knowledge regarding the Indigenous Fine Art Industry and will inevitably do irreparable damage to the livelihoods and income of Indigenous Artists and their representatives alike.
The Fine Art Industry does not have the resources of the Mining Industry (most businesses are one or two people operations) to combat this mistake nor does it have the resources to implement this scheme and its onerous reporting requirements, but just as many careers and livelihoods are on the line.
Ian Plunkett