Let's assume you were lucky enough to have a bit of spare cash at the end of last year, so you decided to invest in the art market.
Chosen at random are some of the works you could have picked up at auction in December (examples from Mossgreen's spring auction). Upper estimates range from $2000 for Matt Calvert's spiky elephant sculpted from industrial glass to $50,000 for Margaret Olley's painting of ranunculus. In between is Brett Whiteley's Night Owl, sketched in ink on paper, valued at $25,000.
Nice stuff if you could afford it and hopefully all will be wise investments.
Now comes the tricky part. How to claim these works of art, and any others you buy this year, as part of your self-managed superannuation fund?
Only in the last financial year the Labor government was planning to prohibit art from being claimed as SMSF investments.
This proposal was abandoned after industry pressure and, after the election, the Gillard government pledged to introduce regulations under the wonderfully named Superannuation Industry (Supervision) Amendment Regulations 2011 (No.2).
These are now in place and were detailed last year in Leonard magazine, the house journal of Leonard Joel auctions. The story was compiled by a professional accountant and fine-art valuer, Michael Fox. He spearheaded the campaign to stop the government's prohibition of art from SMSFs.
"The new laws are certainly more onerous than the previous regulations," he says.
That's an understatement. In brief, here are some important points that now apply.
The new regulations do not apply to collections held at June 30, 2011, for another five years. Work bought before this time may rely on the previous regulations until June 30, 2016. If those artworks are still held after June 30, 2016, without complying with the new regulations, the SMSF will be in breach of the current regulations.
"Related party transactions" are now outlawed. This refers to SMSF artworks displayed and leased to a company or individual associated with the SMSF.
The definition of "private residence" has been expanded to include land used for private purposes, including buildings on that land, such as garages and sheds.
The "in-house asset" rule from the previous legislation has been scrapped. This allowed an SMSF to hold 5 per cent of its total asset value in the form of art in the private residence of a trustee or member.
Fox says this led to a position held by the Australian Taxation Office that the enjoyment of SMSF artworks was some form of pre-retirement benefit. Fortunately, this was never tested in court.
There are new requirements regarding storage. Buyers planning to add an artwork to their fund should have storage before they buy. There will need to be a written record of the decision relating to storage and documentation needs to be kept for 10 years.
Collectors will also need to make negotiations for art insurance before they buy. The artwork needs to be insured within seven days and failure to do so will result in a breach of the new regulations.
Artworks can only be transferred out of the SMSF at a value determined by a qualified independent valuer.
The new regulations also apply to a range of upmarket collectables, including jewellery, antiques, rare coins and manuscripts. These collectables cannot be used by related parties.
"In summary," Fox says, "SMSF artwork investment is still alive, albeit a more conservative strategy may now be warranted. In these new circumstances, acquiring works through the secondary market will have more upside than down."
Art lovers might need professional help to deal with these matters.
The larger art auction houses supply advice and suggest contacts for accountants who have managed to digest the new regulations.