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Pensions: Sydney Clamps Down on Art Investing

The Australian government wants investors to save conservatively, and that means no art

Mixing art and commerce has always been tricky. It's getting trickier in Australia, where workers can stock their retirement savings accounts with paintings and sculptures. "I grew up with art all around me. It's my life. I love it," says John Cruthers, a 56-year-old Sydney resident who has amassed more than 100 artworks to help fund his retirement.

Australia's government may order him to ditch the lot. Proposed pension rules would put curbs on Australians who manage their own retirement savings by investing in art and may even require them to sell their collections within five years.

Artists, exhibitors, and buyers in Australia predict the change would cause job losses, gallery closings, and a slump in prices. Galleries rely on so-called do-it-yourself pension funds for as much as 20 percent of annual sales in the $561 million market, according to Save Super Art, a group campaigning against the proposals. "The goalposts have been moved," says Cruthers, who had planned to sell his works between 2020 and 2030 to cover living expenses. He may now have to sell much earlier for less than he was expecting. "It's really unjust." Adds Jason Benjamin (bottom left), a Sydney-based artist who supports retirement investing in art: "My work is expensive now. It hasn't always been. It doesn't climb out the window one day and say, 'I'm valuable now.'"

The art proposals are part of a broad review of the country's system of retirement accounts, or "supers" as Australians call them. Australians must set aside a minimum of 9 percent of salaries for old age. Jeremy Cooper, the review chair and former deputy chairman of Australia's markets regulator, has said he wants self-managed funds to focus on traditional investments such as stocks and bonds rather than paintings, stamps, wine, and golf club memberships. "These assets lend themselves to personal enjoyment and a range of 'non-investment' factors," he wrote in the report.

Because regulations stipulate pension assets may not be used until retirement, it's illegal in Australia for individuals who hold art in self-managed funds to show their paintings or other works at home, though they can be leased to galleries for display. Cooper wants to block art from pension portfolios to ensure the rule isn't abused, says Sharyn Long, chairman of the Self-Managed Super Fund Professionals' Association of Australia, which represents 420,000 accounts with about $337 billion in assets.

Michael Reid, who runs a 19th century gallery in Sydney's Elizabeth Bay, recently tried and failed to sell two Aboriginal works for a client who was concerned he may have to divest the works if the proposals become law. "People have said, 'I'm reviewing my super now and I'll unload it,'" Reid says. "Maybe it's not the best climate to unload. It's bad policy."

The bottom line: Australians investing in art for retirement face a potential shift in rules that could force them to sell their collections.

Whitley is a reporter for Bloomberg News.

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