There’s a strange thing about art. Try to make money from it and you probably won’t. But start slowly, steer clear of the word “investment” and the works you buy could appreciate. That’s the message from collectors great and small, and from specialists such as art dealer and author Michael Reid.
“In my 10 years of writing for the business section of The Australian I never mentioned the ‘i’ word once,” says Reid, author of How to Buy & Sell Art and Australian Art: Who, When, What and How Much?.
“Those galleries that talk of art as an investment probably breach the Financial Services Reform Act,” Reid says. “I never talk of art as an investment, but as a way to store value.”
It helps, of course, if you know how to maximise the benefits from two significant aspects of Australia’s tax legislation that provide a publicly funded incentive for collectors to donate to both private and public institutions (see box, p36).
Just as art comes in all shapes, sizes and forms, so too do collectors. Some people are trophy hunters, such as entrepreneur Alan Bond, who bid up Van Gogh’s Irises to $US53.9 million in 1987 only to find himself unable to pay for it.
At the other end of the personal ego scale, an “obsessively private” London financier who was reported by the New York Times as having paid $US140 million for Jackson Pollock’s No. 5, 1948 in 2006, making it the most expensive work known.
Then there are the cataloguers, such as Judith Neilson, creator of the White Rabbit gallery in the inner-Sydney suburb of Chippendale and wife of Kerr Neilson, the co-founder of investment firm Platinum Asset Management. Neilson has put together 450-plus works from more than 160 Chinese artists over the past 10 years.
In another corner are the in-depth collectors with specific interests, such as Melbourne architect Corbett Lyon. He has spent two decades amassing more than 300 works by 32 artists that relate to his interests in technology and public architecture.
tHere are tHoSe who like a particular genre such as contemporary landscapes. Or there’s Tasmanian David Walsh, who made a fortune using mathematical models to guide his gambling and in January 2010 opened the $70 million MONA (Museum of Old and New Art) in Hobart to house a collection reputedly valued at $100 million that focuses on sex and death. There are few rules covering what to buy when collecting art – but a good eye helps, as do deep pockets.
Corbett Lyon was guided by Tolarno Galleries’ Georges Mora, who steered him away from a $60,000 mistake after he became infatuated with Albert Tucker at a major retrospective at the National Gallery
of Victoria in 1990 (see breakout). Mora told Lyon that, instead of buying a Tucker, he should
collect the works of his peers for a few thousand dollars each. Marc and Eva Besen took the same tack in the 1950s and amassed one of Australia’s most enviable collections of works by Sidney Nolan, John Brack, Jeffrey Smart and John Olsen. This collection of blue-chip, in terms of both art and investment, works is now displayed at the purpose-built
TarraWarra Museum of Art in the Yarra Valley in Victoria. Lyon says his main mistake when buying art in the early days
was to buy too quickly. The only paintings he has traded were these early mistakes, including 10 bought over one weekend.
Now, with a fraction of his collection installed in the acclaimed Lyon Housemuseum – which took five years to design, two to build and three months for artists to install part of the collection – Lyon is joining what he calls the “new philanthropy”. This is about individuals showing their collections rather than just giving money to public institutions.
What drives people to collect? The owner of Australian Galleries, Stuart Purves, says the rich and powerful – and they’re not alone in this – hunger for the cultural nourishment art provides. “They conquer every single thing they take on, but they need something else to complete themselves, and it’s as important as breathing,” Purves says.
Some collectors love the art scene, where they can meet and socialise with artists. This feeds Lyon as well as Ken and Lisa
Fehily, who left the wealthy Melbourne suburb of Toorak to make a sea change that took them only as far as a gallery in a Melbourne laneway (see breakout).
Others want nothing to do with the artist, Purves says. Collectors may see something in the art that speaks to them and don’t want the artist to tell them it means something different. Others worry they might find they dislike the artist and what they stand for.
For White Rabbit’s Neilson, this isn’t an issue. “Sometimes we will think things are quite meaningful and the artist says there is no meaning,” she says. “I don’t mind that. Works that need to be explained have no point to them.”
meLbourne aCCountant artHur Roe began collecting seriously about 15 years ago, focusing on Australian landscapes by Aboriginal and modern artists. As an adviser in tax andfinancial planning, he’s qualified to talk about art as an investment. “If people go into collecting art with financial aims, nine times out of 10 they will fail,” Roe says. But, he adds, if they do it for the love of collecting they could end up with a very valuable asset.
The main difference from investing in stocks or property is that art doesn’t provide an income. If, on average, the return from shares or property is 10 per cent a year, the split would be about 6.5 per cent capital growth and 3.5 per cent income. Art, on the other hand, returns about 7 per cent in capital growth alone.
Australia being a small market, there are no indices tracking the performance of art investment. However, Artbank – the Federal Government’s arts support program that collects art, rents it out and reinvests the income – reports average annual capital growth of that order over the past 20 years.
Another consideration is that art is expensive to trade. It costs 20 per cent of a work’s value to sell at auction or through a dealer, compared with 1.5 to 2.5 per cent for property and
about 0.2 per cent for shares. As with other assets, capital gains tax is paid on only
half the gain if an artwork is owned for at least 12 months. True collectors rarely sell and don’t care about having the space to hang. “That’s the realm of the interior decorator,” Neilson says. “But eventually something has to give. Our house is filled to the brim.” None of the collectors featured
here have a private foundation behind their collections.
Corbett and Yueji Lyon, Lyon House
Corbett Lyon, the third generation of a family of architects and artists, was first touched by art in 1990 at an Albert Tucker retrospective at the National Gallery of Victoria. He subsequently visited Tucker’s dealer, Georges Mora, the late husband of artist Mirka Mora, at Tolarno Galleries in Melbourne’s South Yarra, where he was advised to start small.
Lyon says the price he paid for his first work, Nude in a Landscape, 1989, by Linda Marrinon, isn’t important. Suffice to say he started out paying a few thousand dollars for each work rather than tens of thousands.
“I’ve enjoyed the journey because the artists are all in my age range and it’s about supporting them,” Lyon says, commending this strategy. “It’s about being a custodian.”
His interests in art intersect with his interests in architecture and now the collection has grown to more than 300 works and into his home-cum-art-gallery.
The Lyon Housemuseum, an internationally recognised space visited by the Guggenheim Foundation last year, is open to the public one day a week.
Lyon made news at the biennial Melbourne Art Fair when he bought major works in the form of Peter Atkins’ Hume Highway Project and four videos by Daniel Crooks.
There are 20 to 30 works of significance in the Lyon collection, including Howard Arkley’s museum-quality work Fabricated Rooms, made up of 17 panels across 15 metres of wall and worth several million dollars.
Other notable purchases include Callum Morton, known for large architecture- referenced installations and digital pictures, including images of McDonald’s and Subway fast-food restaurants.
The Lyon collection also includes artist Penny Byrne, whose political works involve vintage figurines
as well as objects such as Damien’s Diamante Doggie, 2008, an epoxy resin and Swarovski crystal response to British artist Damien Hirst’s diamond-encrusted skull For the Love of God, which sold for US$100 million before the bottom fell out of his market.
Corbett Lyon, the third generation of a family of architects and artists, was first touched by art in 1990 at an Albert Tucker retrospective at the National Gallery of Victoria. He subsequently visited Tucker’s dealer, Georges Mora, the late husband of artist Mirka Mora, at Tolarno Galleries in Melbourne’s South Yarra, where he was advised to start small.
Lyon says the price he paid for his first work, Nude in a Landscape, 1989, by Linda Marrinon, isn’t important. Suffice to say he started out paying a few thousand dollars for each work rather than tens of thousands.
“I’ve enjoyed the journey because the
artists are all in my age range and it’s about supporting them,” Lyon says, commending this strategy. “It’s about being a custodian.”
His interests in art intersect with his interests in architecture and now the collection has grown to more than 300 works and into his home-cum-art-gallery.
The Lyon Housemuseum, an internationally recognised space visited by the Guggenheim Foundation last year, is open to the public one day a week.
Lyon made news at the biennial Melbourne Art Fair when he bought major works in the form of Peter Atkins’ Hume Highway Project and four videos by Daniel Crooks.
There are 20 to 30 works of significance in the Lyon collection, including Howard Arkley’s museum-
Ken and Lisa Fehily,
Fehily Contemporary
In the bedroom of art collectors Ken and Lisa Fehily is an arrow with an electric socket.
It’s by artist Stuart Ringholt and it’s called electric arrow. “And this is ‘bulldog clip’ from Officeworks,” jokes Fehily, who also uses the room as his workspace.
Art really did change the life of the Fehilys, who started collecting in March 2002,
buying a Kerrie Lester painting at auction. Until they bought
that work with the help of an art consultant, they had zero involvement in or knowledge of the art world. “It’s quite overtaken our lives,” Fehily says.
In 2009, after 25 years together, the Fehilys sat down to write their life plan for the next 25 years, dubbing it Project Dream. Within two weeks Fehily had re- signed from account- ing firm Pricewater- houseCoopers and the couple decided to sell their Toorak mansion to set up in
a Melbourne lane. Fehily, once a member of Liberal
treasurer Peter Costello’s GST Technical Committee and the Tax Office’s
Public Rulings Panel, changed from a senior partner to a sole practitioner while wife Lisa started her own gallery space, Fehily Contemporary, in Guildford Lane.
The Fehilys prefer not to be known as collectors and like to use art for social change. The themes of the works they buy are often political and controversial. The collection includes the controversial Archibald finalist self-portrait
of artist Sam Leach dressed as Hitler, as well as tamer self-portraits such as that of Melbourne artist Kate Beynon, portraying her Asian roots. There’s work made from the flesh of artist Alicia King and others woven from human hair.
“Art’s not about money, particularly contemporary art,” says Ken Fehily. “We want it to be part of our life. It keeps us young.”
Their cheapest work is a sculpture that cost $20 from Salamanca Market in Hobart, Tasmania. Their most expensive works include a $250,000 Evan Penny sculpture of a biker named Murray, one of their favourite works.
Judith Neilson, White Rabbit Gallery
Judith Neilson started collecting when she was 18 months old. “It was a little silver bell I was given off a horse,” she says. She moved on to Kewpie dolls and then African carvings and ceramics – specifically mother- and-child works from the mission stations in South Africa.
Later again she moved on to Coca- Cola bottles, which she still picks up if she stumbles across an interesting one.
In 1999 she discovered Chinese art after meeting Sydney artist Wang Zhiyuan, who introduced her to the wave of creativity coming out of China over the previous decade.
Six years later she and husband Kerr had the idea for White Rabbit, which documents 10 years of Chinese art covering some 165 artists and 450-plus works.
“I don’t go out thinking I’m going to collect. I’ve only got things that I really like,” she says. “I’ve never dreamt of buying something just because it was Chinese.”
She soon realised the Chinese market was being manipulated by auction houses, collectors and sometimes by the artists themselves. The artists were
getting no respect and she wanted to do something about that. As a result, she has been very particular about paying a fair price reflecting the effort that goes into a work.
Neilson describes White Rabbit as a collection rather than a “star” show: “You can’t pick famous artists out from it.”
They all “expand the imagination”, she says of the works. “It’s a very personal collection. We’re not experts. It’s our taste and what we like.”
As with all the collectors interviewed, Neilson knows exactly what the collection is worth but won’t reveal this. “I don’t ever think we are ever going to make money out of it.
Cultural gifts
According to the Cultural Gifts Program website (www.arts.gov.au /tax_incentives/cgp), by October this year A$608 million worth of art and other objects had been donated to public galleries and museums under the program since 1978. The program allows collectors to claim a tax deduction for the full value of a donated collection or an individual work, either immediately
or spread over five years. For example, someone who donates to an approved institution a work (which must be valued by an accredited professional) worth $2 million will receive a $2 million revenue deduction that can be offset against both capital gains and income.
Hybrid donations are also permitted, says Arthur Roe. For instance, he says, the recent donation of a $5 million collection to a leading NSW public gallery was structured as a $3 million donation under the Cultural Gifts Program and
a $2 million payment from the gallery. The donors received a tax deduction of $3 million, some of which they could offset against the $500,000 capital gain included in the $2 million payment, leaving them with $2 million in cash to start a new collection, and $2.5 million of deductions against future income.
Australia’s tax legislation was amended in 1999 to allow the establishment of prescribed private funds (meaning private charitable) trusts. In the case of art, a full tax deduction can be claimed on donations to one of these private trusts – by either the founders or by outsiders – potentially spread over five years. There are strict rules governing the trading activities of these trusts. The proceeds from asset sales must be spent on purchases of new works. The trusts must also allow for public showings of works. The legislation was modified in 2009 to tighten up the criteria for the trusts, which are now called private ancillary funds.