The resale royalties on art debate will probably be back on the menu in New Zealand with a new scheme being introduced in Australia some time next year. In this country Labour had championed the scheme which is of dubious merit but National appear to have put it firmly on the back burner

The Resale Royalty for Visual Artists Act 2009 which was passed by the Australian Senate into law last week (November 26th) will mean Australia's visual artists will receive a portion of the proceeds from the resale of their works.

It is anticipated that a collecting agency to administer the right will be appointed in early 2010, and the resale royalty right will take effect six months after the legislation receives Royal Assent. The Government announced funding of $1.5 million over three years in the in last year’s Budget to support the scheme’s establishment.

The collecting agency will be responsible for the collection and payment of resale royalties. To do this, the agency will be required to monitor the commercial resale of artworks, and to identify the holders of the resale royalty right who are entitled to receive royalties.

Under the scheme, artists will receive five per cent of the sale price when original works are resold through the art market for $1000 or more. This will apply to works by living artists and for a period of 70 years after an artist’s death.

The scheme will cover original works of art, such as a painting, a collage, a drawing, a print, a sculpture, a ceramic, an item of glassware or a photograph.

The scheme will apply to the commercial resale of works of art involving art market professionals, public institutions or organisations, and all resales subsequent to the first transfer of ownership, regardless of whether the first transfer was made by sale, gift or any other means.

The new resale royalty right will apply to the resale of all works of art acquired after the legislation comes into effect.

It does not mean the resale royalty right applies only to works created after the legislation comes into effect. Resales of existing works of art acquired after the right commences, including works by deceased artists, will be covered by the scheme.

This is to ensure that buyers of works of art make their purchases with the knowledge that a royalty may be payable if they decide to re-sell works.

The legislation has divided the Australian art establishment with many in the art market pointing out the folly of the moves.

Sotheby’s noted that Australian collectors already pay copyright fees, GST, capital gains tax and income tax on any profits of resale. The legislation would mean another level of tax which would discourage collectors from purchasing art.

They also point out that there would be an increase in private sales which would undermine the role of auction houses who would be commercially disadvantaged.

Notes issued by the Department of the Environment, Water, Heritage and the Arts give a few examples of how the new scheme will work

Deceased estate.

A sculpture created in 1994 by a now-deceased artist and first purchased in 1995 sells at auction for $800,000 after the resale royalty right legislation has come into effect.
There will be no royalty payable to the artist on this sale, as it is the first transfer of ownership of the work following the introduction of the resale royalty right.

Indigenous art.

In July 2011, after the resale royalty right legislation has come into effect, a gallery owner negotiates with an Indigenous art centre the outright purchase of a range of works. One canvas is purchased for $10,000.

The gallery owner puts the work up for sale at an exhibition in December 2011, and the canvas is purchased by an investor for $16,000.

A royalty payment to the artist of $800 (less administration costs) is triggered as the gallery owner acquired the work following the introduction of the resale right.

Inheritance

A collector who had purchased a limited edition etching in 2001 for $5,000 dies in 2010, after the resale royalty right legislation comes into effect, and leaves the etching to her son in her will.

In 2012, the son sells the etching at auction for $7,000. This resale triggers a royalty payment to the artist of $350 (less administration costs), as the seller (the son) had acquired the work following the introduction of the resale right.