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Artworks contribute to the creation of distinct national cultures and to economic growth. National art collections attract tourists. Local government commonly relies on the arts to bring in visitors, create jobs and develop skills, attract and retain businesses, revitalise places, and develop talent. Many cities seek to emulate ‘the Bilbao effect’ of Frank Gehry’s Guggenheim Museum through a destination gallery, such as the Museum of Old and New Art in Hobart. Beyond cultural and economic considerations, exposure to the arts has broad health and education benefits.

It is therefore understandable that governments may use tax policy to encourage collection of artworks for public benefit.

Tax concessions in countries with mature art markets

In London, New York and Paris, the centres of mature art markets, transactions take place within art ecosystems that comprise well-established schools, ateliers, galleries and museums, auction houses, and clusters of specialisation. Collectors are also typically knowledgeable and actively participate in processes of creating, exhibiting and marketing artworks. According to Annabelle Gauberti, in jurisdictions that host mature art markets,

‘tax law has … become instrumental in promoting the creation, consolidation and expansion of private collections and patronage … [because] no matter how much the state intervenes to keep art works, artefacts and antiques on its soil and in its museums, the first and irreplaceable preserver of the national estate is the private owner.’

European net wealth taxes and capital transfer taxes often include concessions for collectors. Both France (dation en paiement) and the United Kingdom (acceptance in lieu) permit a taxpayer to settle their estate tax debt by transferring a culturally important artefact to the state. As private assets, artworks are exempted from capital gains tax (CGT) in several countries. France exempts gains from the sale of an artwork if the sale price does not exceed €5,000 (about A$8,000). In the United States, although collectables are subject to a higher than normal rate of tax, sales of artworks long qualified for CGT roll-over relief. While that concession has been removed, CGT liability on the proceeds from sales of artworks can be deferred if the proceeds are invested in qualifying Opportunity Zones.

Under the French General Tax Code (Code général des impôts), for the year of purchase and the four subsequent income tax years, businesses can deduct 20 per cent of the purchase price of an artwork that is publicly accessible. Donations of artworks to public institutions also attract special income tax deductions. Other French tax incentives to promote artists include a value added tax (VAT) concession that allows registered artists to charge only 5.5 per cent VAT on direct sales of their artworks to collectors. The United Kingdom currently permits the maximum VAT exemption under the relevant EU directive, and so imported works of art are taxed at an effective rate of five per cent, rather than the standard rate of 20 per cent.

Comparing Australia’s and New Zealand’s tax-benefit treatment of artworks

Relative to the French or British art markets, the Australian market is immature. In 2012, Australian auction sales represented just 0.6 per cent of the total global auction market. The relatively unsophisticated nature of art investment in Australia was reflected in the Cooper Review’s recommendation that collectables should not be permitted as investments for self-managed superannuation funds. The Cultural Gifts Program offers CGT incentives for donations of artefacts to Australia’s public collections. However, the effectiveness of this initiative is affected by some investors’ lack of sophistication. As Annette van den Bosch observes:

‘Private collectors collect different works to art museums – they collect more decorative pictures. Private collectors are often surprised when a gift they propose to a state or national gallery is declined … Inexperienced collectors lacking serious knowledge of art and museum collections can often be misled by an unscrupulous dealer or a belief in the supremacy of their own taste.’

Australia does not levy net wealth or capital transfer taxes, and GST-preferred goods and services do not include artworks. A discussion of capital taxes lies beyond the scope of this article, and it is submitted that, although GST purity has already been compromised, the tax should not be further complicated by including preferences for artworks. CGT and superannuation benefits are, therefore, the key points of policy focus, which also invites comparison with New Zealand, whose art market is at a similar level of development.

In Australia, personal use assets acquired for less than A$10,000 are disregarded for CGT purposes. Relevant assets include boats, furniture, electrical goods, and household items but exclude collectables, such as paintings, sculptures, drawings, engravings or photographs. Gains on collectables acquired for less than A$500 are, however, excluded. Presumably, personal assets are considered to be wasting assets, whereas collectables are not.

New Zealand does not levy a general CGT. However, the rejected CGT recommendations of the 2019 Tax Working Group, included a blanket personal-use asset exemption for items, such as works of fine art. According to the Tax Working Group, collectables ‘are distinguishable from other types of personal-use assets because they are often purchased as investments and are usually expected to increase in value’. Artworks, in general, do not increase in value; they are also often fragile and easily destroyed, and may lose significant value if tainted as fakes or simply go out of fashion.

If followed, the Tax Working Group’s recommendation might have perversely incentivised wealthy individuals to invest in the global art market in search of tax-free gains. Such investments would present significant risks for individuals, and would not have contributed to developing the domestic art ecosystem. The Cooper Review recognised that tax concessions should not benefit investors in risky, unregulated forms of investment. The art market is, indeed, generally recognised as the last unregulated mainstream market, and, perhaps, the Australian market is in particular need of coherent regulation, since as many as one-third of artworks for sale may be fakes.

Unlike the Age Pension, which is means-tested, albeit with a significant asset exemption, New Zealand Superannuation is a universal benefit. The asset means-test for the Age Pension is comprehensive and includes motor vehicles, boats, personal items, and trading, hobby or investment collections. The same rules apply to aged care applications. In contrast, for the purposes of ascertaining eligibility for New Zealand’s residential care subsidy, ‘exempt assets’ include ‘personal collectables or family treasures or taonga such as artworks, books, stamps, and antiques’. Although regulations may prescribe value limits for types of exempt property, none currently apply to personal collectables. Furthermore, no relation-back provisions appear to prevent converting non-exempt assets into exempt assets, such as artworks.

Australia’s inclusion of all types of assets in its superannuation and residential care means-test, coupled with a significant allowance, is preferable to New Zealand’s blanket exemption of personal collectables. On the one hand, policies should encourage investment in domestic art, but, on the other hand, investment in the general economy should not be discouraged. The New Zealand Tax Working Group’s proposal of excluding all collectables from a putative CGT net on simplicity grounds was disproportionate. Conversely, Australia’s CGT approach to collectables sends odd signals to taxpayers. Surely, buying, say, a boat should not be privileged over buying an artwork? An appropriate approach would lie with allowing a A$10,000 for all personal assets, including collectables.

Tax policy should encourage collective action

Generally, Australasian policymakers should be wary of models from countries with more mature art markets. For example, the creation of free ports in Switzerland and the United States has facilitated speculation, tax evasion and money laundering.

Policies that emphasise and privilege the role of individual collectors are also questionable. Individual collectors do contribute to the constitution of national culture, but collective action through regulated and tax privileged charities may present a preferable policy option.

In immature art markets, removing barriers to collecting works of local artists may be a more appropriate policy goal than providing incentives to private collectors. To this end, no distinction should be drawn between personal-use and collectable assets, because a nudge towards personal-use assets may discourage investment in artworks. Conversely, a cap on exempted personal-use assets, if applied equally to collectables, might encourage purchases of less expensive artworks created by emerging local artists.


This article is based on Jonathan Barrett, ‘Philistines v Elitists? A Comparison of Australia’s and New Zealand’s Tax-Benefit Treatment of Collectors of Artworks’ (2019) 14(1) Journal of the Australasian Tax Teachers Association 7

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