The Australian art market and many art collectors are reeling at the news that a recommendation has been made to the government to bar self-managed super funds (SMSFs) from purchasing artworks.  This was detailed in the final preliminary report of the Cooper Review which was asked by the Federal Government to examine and analyse the governance, efficiency, structure and operation of Australia's superannuation system.

In the words of former ASIC chairman Jeremy Cooper "whichever way we look at it, SMSFs are here to stay, but we want them to focus more on investing for retirement savings rather than related party transactions, collectables and leverage."

The practice of purchasing artworks through SMSFs has long been problematic as the ATO regards art as a "personal use asset".  This has led to confusion regarding the quantity of artwork that can be held in a super fund as well as lengthy discussions and lobbying regarding the ban on hanging the artworks on the wall.

Perhaps the most disturbing element of this proposal is the recommendation to make the legislation retrospective, giving SMSFs just 10 years to remove all collectables from their asset lists.  Surely a forced liquidation is contrary to the basic premise of superannuation?

Apparently it is too late to make submissions to the Cooper Review and the final report will be delivered on June 30th.  Watch this space for an update.