Steven Ciobo (Moncrieff, Liberal Party, Shadow Minister for Small Business, Independent Contractors, Tourism and the Arts) Share this | Link to this | Hansard source

We are here in the chamber to talk about the government’s Tax Laws Amendment (Resale Royalty Right for Visual Artists) Bill 2009. This is an additional piece of legislation as part of the package of bills being put forward to the parliament by the Minister for the Environment, Heritage and the Arts, Peter Garrett, who is the member for Kingsford Smith, as part of the federal government’s ongoing—as it claims—commitment to Australia’s arts sector. This includes in particular the instrument of resale royalty right for visual artists that the federal Labor government introduced with the support in some respects—and certainly as a matter of principle—of the opposition. To go back to the beginning, the Labor Party took to the last election a commitment that if elected they would seek to introduce a resale royalty right, a right that has been recommended on and off over the years by a number of inquiries into Australia’s visual arts sector. In principle, it is a right of which the coalition is supportive. At the outset of this journey we commenced on the pathway to where we are today—and ultimately to what we hope is the end point—that is, the establishment of the resale royalty right at law, its assent being received by the Crown and the legislation being put into practical effect.

At the outset, the vision espoused by the minister was that, after the resale royalty right came into effect, artists would receive five per cent of the sale price when artworks were resold for $1,000 or more. A collecting society on behalf of artists and at the specific request of artists would move to collect the fee and subsequently disperse it to the artists. This has been an issue of some controversy over the years. Historically, the opposition did not support the notion of a resale royalty right, but I was pleased to play a role in arguing that there was merit and scope for the opposition to support this as a matter of principle. Fundamentally, what has transpired in the months and years since the resale royalty right was first advocated by the Labor Party can only be described as a debacle. The fact is that the minister responsible for this legislation—this enabling Tax Laws Amendment (Resale Royalty Right for Visual Artists) Bill 2009 and the main instrument, the Resale Royalty Right for Visual Artists Bill 2009—has handled it poorly.

At the outset, the minister said that the legislation would provide a raft of benefits for visual artists. The situation now is that there are so many caveats, compromises and concerns that, in large measure, this legislation has effectively become unworkable. The opposition will not frustrate the passage of this legislation because we believe it is better to have something than to have nothing. But, time and time again, the minister responsible for the carriage of the legislation that introduces the resale royalty right has demonstrated his inability to remain abreast of the issues and to keep this legislative package moving forward with appropriate speed.

I will run through in chronological order what has transpired. On 3 October 2008, the minister put out a media release entitled ‘Artists to benefit from resale royalty right’, which outlined the vision the minister had about what the resale royalty right would mean for visual artists. Understandably, at the time artists in Australia’s visual art sector were excited about the proposal. On 21 October 2008, 19 days later, the minister provided a ministerial statement to the parliament, and I was able to outline the opposition’s response to that ministerial statement and highlight the opposition’s views and concerns about how the resale royalty right would operate. On 27 November 2008, the minister introduced the legislation and immediately referred the legislation to a committee for investigation and report. That was the first unusual step taken.

On 20 February 2009, 140 days after the announcement of the resale royalty right, the committee tabled its report. I know some Labor members speaking in the parliament today were part of the committee that undertook that report. They recommended a raft of amendments to the initial legislation, which had its genesis in a thought bubble from the Minister for the Environment, Heritage and the Arts. On 19 March 2009, 168 days later, I spoke on the bill which had been amended by the government—the minister amended his own legislation to take into account some of the recommendations put forward by the committee.

On 28 May, the government tabled its response to the committee’s report. Bear in mind that, as shadow arts minister, I had already spoken on the legislation that was being amended, 168 days after the announcement, and then 238 days after the announcement the government actually tabled its response to the committee’s recommendations. Most people who observe the flow of legislation through this building would recognise how completely back to front this whole process has been.

I have spoken previously about how the minister assured me only 10 minutes prior to my speaking on the bill that I would not in fact need to speak on it because the bill would not be before parliament, although only 10 minutes later it was brought on. To me, that really demonstrates how little knowledge the minister has of the process of this legislation and what has been happening with it. Debate on the bill resumed 321 days after the announcement of the resale royalty right on 19 August this year. This was after I agreed to refer the legislation to the Main Committee to assist the minister in delivering on his commitment.

On 7 September 2009—340 days after the initial announcement—the bill finally passed the lower house. And here we are on 19 November talking about the establishment of a resale royalty right—a key priority, a key election commitment of the Labor Party—with the legislation still most unlikely even to be debated in the Senate. It took 340 days for the legislation to get through the House of Representatives. Now, another 60 days or so after that, we are still waiting for this minister to provide some influence to get the legislation brought on in the Senate. I am regularly contacted by Australian artists expressing their dismay at how inept this whole process has been and how utterly inept the minister for the arts has been on one of the key platforms that he outlined, espoused and advocated prior to the election of the Rudd Labor government. But we should not be too surprised because, frankly, we have seen not only with respect to resale royalty rights but across the board that this is a government that is very big on talk but very poor when it comes to actual action and delivery.

The legislation that is currently before the chamber seeks to amend the tax laws with respect to the resale royalty right effectively to do three things. The amendments ensure that the resale royalty right collecting agency is not taxed on amounts that it collects on behalf of resale royalty right owners and then holds pending allocation or disbursement to the actual artists themselves. This makes inherent sense, because the second limb of the legislation provides that, when those resale royalty right holders receive the amounts from the resale royalty right collecting society, they are then required to include those amounts as part of their assessable income to the extent that those amounts are not subject to income tax in the hands of the collecting society, which is what this bill provides for.

The third limb of the bill provides that the resale royalty right collecting society is not taxed on other income it derives from other sources, provided that the amount of this other income falls within certain limits which, in broad terms, are $5 million, or five per cent, of its total income in the income year. That is what the bill before the chamber currently deals with. It is non-controversial in that it simply seeks to provide an incentive for the resale royalty right collecting agency to operate. It provides enhanced profitability but, if you actually dig a little deeper beyond the bill that is before the parliament today and consider the enabling framework that has been put in place for the resale royalty right, you will find that although there will be direct funding in the initial start-up years for the resale royalty right collecting agency—as is anticipated not only by the opposition but by independent third parties who know Australia’s visual arts sector well—it is likely to collect so little money that the commercial profitability of the resale royalty right collecting agency is likely not to be there right from the beginning.

Even as funding from government is withdrawn or is anticipated to be withdrawn, I make the prediction that the resale royalty right collecting agency will be placed in a situation where it will need to come to government for additional funding in order to remain viable or, alternatively, will need to seek to cross-subsidise its operations in some way through profit centres that it has in other businesses. To the extent that this particular piece of legislation provides some additional commercial attractiveness to undertaking the role, it is little surprise, frankly, because the enabling legislation for the resale royalty right is so fundamentally flawed with respect to creating a commercial business case for the resale royalty right collecting agency that, without this additional carrot, I doubt there would be much incentive to get into the business of being the resale royalty right collecting agency at all.

I will be interested to hear what Labor members opposite have to say about the complete debacle that this process has become. I would be interested to hear, as Labor members attempt to explain why—and I note that this time the member for Leichhardt is not listed to speak. I wonder why, given that he has historically been a proponent of a resale royalty right. In fact, the member for Leichhardt, when he spoke on the enabling legislation previously before this chamber, said that for too long visual artists had not been recognised and that the legislation needed to be brought on as soon as possible to enable that right to flow to the artists themselves. Given that it has now been well over a year and the minister still has not been able to get the legislation debate brought on in the Senate, it is little wonder that visual artists have such little faith in this minister.

I will confine my comments to those observations on both the operation of the specific tax laws amendment bill that is before the parliament today and, more broadly, the operation of, and flaws within, the resale royalty right. On numerous occasions now I have facilitated this minister’s inability to deal with the legislation in a timely way, and the opposition has worked constructively to help this minister get this legislation through the parliament and has conceded a number of process matters to assist the minister. The fact is this Labor government really needs to pull its socks up when it comes to delivering on the resale royalty right for artists if anybody in the Australian original art sector is going to take this minister seriously when it comes to providing a framework for the resale royalty right in the future.

Shayne Neumann (Blair, Australian Labor Party) Share this | Link to this | Hansard source

I speak in support of the Tax Laws Amendment (Resale Royalty Right for Visual Artists) Bill 2009. I was pleased to be at the national conference of the ALP and to support this legislation when it was originally proposed in the form of a policy statement before the 2007 federal election. Our policy statement was titled ‘New directions for the arts’ and that is what this is all about. I am very supportive of the many arts societies and collectives and galleries in my electorate of Blair in South-East Queensland.

The legislation before this chamber deals with tax and how the collecting society will not be taxed for the purpose of assessable income in relation to moneys received concerning the resale of artworks. The situation is that the arts play an important role in our community, whether in national life or at the local level. This was acknowledged by former Labor Prime Minister John Curtin in 1942, when he distinctly commented on it at the height of Australia’s involvement in a conflict which could have seen us invaded. When we were under threat from the Japanese empire, he made it very clear that the pursuit of the arts and culture was crucial to a young democratic nation, and it was the measure of our development as a nation that we focused on those pursuits. So it was a Labor government under him, and later under Chifley, and later under Whitlam, that promoted the arts, whether drama or music or theatre or the visual arts, which promoted our culture and which promoted our development.

Gough Whitlam, the former Labor Prime Minister, said that the arts should not be remote from society but should be central to our culture. That is what Labor governments through history have supported. The substantive legislation will benefit up to 20,000 people who are involved in visual art. This legislation, which enhances the scheme that we are undertaking, helps the people who develop our national identity and recognise our long history and enduring culture, our Indigenous people—those from the Torres Strait and our Aboriginal brothers and sisters—whose artwork, sadly, at times is despoiled by people who take advantage and counterfeit it.

What we are doing here is enabling the tax laws to better line up with income so that the collecting agency is not taxed. One of the things that really infuriate companies and individuals in dealing with the tax system that we have in this country is when there are transfers of money or land, or restructuring of corporate arrangements, and no income is actually earned or needs to be assessed, and they are subject to complicated tax laws that deal with corporate structures and trusts. We cannot have a situation in this country which is adverse to the taxpayers of this country in that way. This legislation is about ensuring that our complex trust taxation laws and rules do not impinge on the collecting agency and in effect there is no double-dipping when it comes to taxation.

This government has made it clear that it is determined to establish a resale royalty scheme for visual artists, allocating $1.5 million in the budget of 2008-09, as the Minister for the Environment, Heritage and the Arts announced on 13 May 2008. This scheme that we intend to establish is important for our economy but it is also important for our national identity and our community activities. We will assist artists to get fair payment for their works—proper recognition of their talent, skill and capacity as demonstrated in the artwork they so lovingly develop. This will provide an additional source of income for artists and bring us in line with so many advanced Western economies, in Europe and elsewhere.

The independent collecting society which is established under the substantive bill will collect the money. When there is a resale of a piece of art such as a painting, a drawing, a sculpture, a photograph, an item of glassware or some other such artwork, the artist will receive up to about five per cent when those original artworks are resold through the market for more than $1,000. We hope this will continue beyond the artist’s life so that the beneficiaries in their estates, whether in intestacy or under will, will benefit as well from the artwork developed.

Labor is strongly committed to ensuring that we have a better system to recognise the value of people in the arts. I love sport—absolutely love it—Brisbane Broncos tragic that I am. I played a lot of sport when I was younger. But it must be recognised that more people visit our art galleries in this country than attend sporting activities. We may see 100,000 people at the MCG or 40,000 at Suncorp Stadium or tens of thousands at Parramatta Stadium, but the truth is more people visit art galleries and are interested in the arts than are interested in sport in this country. Art is not given the recognition it deserves in our cultural and community life.

The legislation that is before this chamber ensures, as I said, that the resale royalty collecting society is not taxed on the amount it collects and holds on behalf of artists. What will be established, in effect, is a trust arrangement where the society holds that money in trust. If you establish a unit trust, it is likely that there will be tax on income that is brought into the unit trust. It is the same with respect to a family trust or even a discretionary family trust: income is often taxed unless the money is disbursed to the beneficiaries under the family trust. So there is a risk that the tax laws will impinge and adversely affect artists and the collecting society.

As the shadow minister outlined, the changes are accurate. What we are doing here is making it clear that the collecting society is not to be taxed on income it derives. It is subject to certain limits as well: five per cent of its total income or $5 million, whichever is the lesser. There is the streamlining of tax treatment, which replicates what happens with respect to copyright payments handled by copyright collecting societies. There are also some technical amendments replacing references to copyright income and non-copyright income with general terms and making sure they are consistent across copyright arrangements as well as the resale royalty arrangements.

The arts are so important at a national level, but they are also important at a local level, as I will explain in a minute. A body will be established, a collecting society, which will apply in relation to the holding of money. A body can apply to the arts minister to be a collecting society for the purposes of the royalty scheme. The arts minister has the discretion, as he or she should have, to appoint a body as a collecting society. That body must be a company limited by guarantee. In other words, there are no shares in relation to that company. I established dozens and dozens of companies limited by guarantee when I was in legal practice. The members of the company are usually the directors. I established many for churches and charitable institutions. They hold the assets, usually preferring to establish a company limited by guarantee rather than, say, in Queensland, being associated or incorporated under the Associations Incorporation Act. This is a useful corporate entity, and it is different from a public company or a proprietary limited company.

As I said, the resale royalty rights scheme and legislation that is before this chamber will help my local area. I want to speak about how and why it will. In South-East Queensland, as the population has continued to grow—and we expect another 1.2 million people to come to South-East Queensland in the next 20 years—we have seen a burgeoning outside of Brisbane of interest in the arts, particularly visual art. You can see that in small areas outside Brisbane, as they continue to expand—for example, in Ipswich, in the Somerset region, in the Lockyer Valley and in the Scenic Rim area. In the Scenic Rim area, the Boonah Arts Collective, which runs the very successful SPAR Arts Festival every year, has seen an incredible interest in visual arts. Literally hundreds of works are displayed in Boonah and Kalbar in that festival, and there are hundreds of people involved.

Good friends of mine, Sharon Murakami and Julie Jackson, were actively involved in that society. Clive Beaton is the current secretary. The committee meet four to five times a year and annually for their AGM. They promote the arts tremendously well. The artists often show their artwork in Ipswich and elsewhere. Last Saturday night I had the pleasure of being at the Laidley Art Society, where artists from the Scenic Rim area were showing their wares. I was a major sponsor of the Boonah Arts Collective and the SPAR Arts Festival. At Laidley, where I am the patron of the Laidley Art Society, tremendous quality artwork was shown. I congratulate all those people involved. It was a tremendous night to see the quality and the character of the local area. There were paintings and photography of local icons in towns like Laidley, Boonah and elsewhere on display. It was a credit to the Laidley Art Society and I am happy to have been associated with it. They have done a great job. I want to congratulate President Terry Merrick and Phillipa Van Glist. Phillipa describes herself as the ‘dog’s body’—she does just about everything for the society. I was pleased to be there and congratulate them and open the festival.

You see a burgeoning number of people actively involved in the arts in places like the Somerset region. I was pleased to be at Lowood on 10 October at the opening of the Open Door Gallery at 45 Railway Street. Michelle Pakleppa and the President of the Lowood Lions, Keith Leese, were there along with the Mayor of the Somerset Regional Council, Graeme Lehmann, and the state member for Ipswich West, Wayne Wendt. I said at that opening that it was a demonstration of a community that clearly cared about each other and the arts. That gallery was initially started to help youth in the area but has been turned into a facility that everyone can use. It is a creative outlet for the area. We have already seen a lot of people visit that gallery. Michelle tells me that they have sold a number of pieces of artwork in that gallery and of course they will benefit. The people in those areas will benefit from the substantive legislation and the legislation that is before the chamber today.

I want to talk about my hometown briefly and how it is going to benefit through this legislation. Ipswich—and I am proud to wear the Ipswich pride pin today—has the largest regional gallery in Queensland. It is the most visited regional art gallery in Australia. It runs a lively audience centred program in the visual arts. There are also a lot of social history exhibitions and ongoing collaboration with local artists, educators and historians. I could listen to Michael Beckmann, the Director of the Ipswich Art Gallery, for hours. My wife, Carolyn, and I were at the Ipswich Arts Foundation earlier this year for a fundraiser. Thousands and thousands of dollars were raised that evening for the Ipswich Art Gallery. Michael is an enthusiast. Where he gets the works from is extraordinary. He has been a wonderful advocate for the local community in Ipswich. The Ipswich Arts Foundation, which was established back in 1997, is ably led by Sandy Horneman-Wren, a barrister and a good friend of mine. The patrons are Sir Llew Edwards, the former member for Ipswich and former Deputy Premier of Queensland, and, of course, my good friend Paul Pisasale, the Mayor of the City of Ipswich

The arts foundation does a wonderful job to promote local artists. I have been to many exhibitions, but one exhibition of very spectacular art by local artist Andrew Spark really captured my attention. Andrew is a mate of mine and he does a great job in promoting and helping business for the chamber of commerce but also in showing his very creative abstract form of art. People like Andrew will benefit from the legislation before the chamber today. We have seen arts blossom through the area, and I commend the Ipswich City Council for its support. My own local councillor is Charlie Pisasale. Charlie is the Chairperson of the Arts, Community and Cultural Services Committee—a very long title. Charlie has been actively involved in the Ipswich Arts Foundation and the Ipswich Arts Foundation Trust, which raised nearly $9 million through grants, subscriptions, philanthropy and sponsorship to benefit the Ipswich Art Gallery and the City of Ipswich collection since it was established in 1987. A budget through the Ipswich City Council in 2009-10 of $50,000 will support the foundation and the trust operations. All of these local groups, foundations and galleries will benefit from the legislation that is before the chamber. I strongly believe that the arts will continue to prosper in Ipswich and the rural West Moreton area.

I want to finish by noting just how important this sort of thing is to the cultural history of my area and elsewhere, acknowledging the wonderful support of the University of Queensland Ipswich campus and showing how history, culture and the arts can link. The University of Queensland Ipswich campus supported the Peter Harley: an Ipswich woodcarver exhibition, which was displayed in February 2009 in the Ipswich Art Gallery. The University of Queensland Ipswich campus occupies the site of the Challinor Centre. Two pieces created by Mr Harley were on display. With the assistance of the university, Professor Alan Rix, the Pro-Vice-Chancellor, and the Ipswich Art Gallery over 60 pieces on loan were displayed. The amazing creativity of this man is interesting. He was in an asylum for much of his life. He was 35 years of age when he came to the attention of the Rockhampton police for being confused and unable to give a clear account of himself. He had no woodcarving tools in his possession when he was detained. It appears he took up woodcarving after he was institutionalised in the Challinor Centre in Ipswich. He was transferred to Ipswich in 1908 and spent the remaining years of his life there. If a man like Peter Harley can create works that today we still look at, cherish and value, imagine how what we are doing in this scheme will benefit artists now and in the future. This legislation is innovative and creative and, importantly, will help the financial security and the future prosperity of our arts. I commend the legislation before the House.

Tony Zappia (Makin, Australian Labor Party) Share this | Link to this | Hansard source

I too rise to speak in support of the Tax Laws Amendment (Resale Royalty Right for Visual Artists) Bill 2009. Before I get to the substance of my remarks, can I respond to some of the comments made by the member for Moncrieff earlier, when he accused the minister of not getting on with this bill and made comments about how long it has taken for the matter to come before the parliament. To state the facts and put everything into context, the question of resale royalty in fact dates right back to 1971, when the Berne convention was established. Australia acceded to and became a party to the Berne convention in 1977, and its formal entry to the convention was in 1978. It is interesting that since the convention some 54 countries of the 160 signatories to the convention have implemented a resale royalty scheme of one kind or another. Most of them are pretty similar in nature, but there are clearly some differences between then if you go through the list of each of the individual countries.

What is perhaps more pertinent to the debate, however, is that in 2002 there was the Contemporary Visual Arts and Crafts Inquiry conducted by Mr Myer, which is often referred to by people as the Myer inquiry. The report of that inquiry under the previous Howard government recommended that a resale royalty scheme be put in place. In 2006 the Howard government of the day decided it would not adopt the recommendations of that report. A press release issued at the time by the then Attorney-General, the Hon. Philip Ruddock MP, and the then Minister for the Arts and Sport, Senator the Hon. Rod Kemp, said:

It would bring little advantage to the majority of Australian artists whose work rarely reaches the secondary art market and would also adversely affect commercial galleries, art dealers, auction houses and investors.

The first point I make about that press release is: here is the member for Moncrieff criticising this government for getting on with introducing a resale royalty scheme when the previous government, of which he was a member, had received the Myer report that recommended that a resale royalty scheme be brought in yet it refused to do so. It refused to do so because it would:

… adversely affect commercial galleries, art dealers, auction houses and investors.

In other words, there was little regard for the artists, whom the member for Moncrieff comes into this chamber and pretends he stands for. They were only concerned about the auction houses, the investors, the art dealers and the galleries—the people who profit from the work of the artists, who this bill is trying to bring some fairness to.

It is worse than that. In 2004 Senator Kate Lundy, a member of the current Rudd government, introduced a private member’s bill because the Howard government did not act on this matter. Did the coalition support that bill? No, they did not; they voted against it. They had an opportunity to introduce their own bill into parliament as a result of a recommendation of an inquiry which they instigated. They did not do that and they also refused to support the bill introduced by Kate Lundy. In other words, for 12 years in government they did nothing. The member for Moncrieff comes in and criticises the current minister, who once he was elected got on with drafting the necessary legislation and introducing it into parliament in the first year of this parliament.

Yes, it has taken some time. It has taken some time for good reason. Part of that good reason is that, when the bill was drafted, it was clear that there was going to be an issue about whether the legislation could be retrospective or had to be prospective. In other words, would it commence after the legislation came into effect—when the first piece of artwork was acquired after the legislation came into effect—or would it come into effect as soon as the legislation passed, so any sale or acquisition from that point would attract a resale royalty? That was a contentious issue on which the government sought advice. The advice was that, in respect of section 51(xxxiii) of the Constitution, there was an argument that it might fall foul of the general legal opinion on acquisition of property on just terms.

The minister was aware that there was some unhappiness with the legislation in its current form, so he, quite rightly, referred it to the House of Representatives Standing Committee on Climate Change, Water, Environment and the Arts. It was referred to the standing committee on 28 November 2008 and the committee convened a public hearing on 6 February 2009. Bearing in mind that at the end of November parliament goes into recess, convening a meeting in February is about as quick as you can act to deal with the issue at hand. If I recall correctly, some 40 people came along and gave submissions. As a member of that committee, I attended the public hearings. We listened to the points of views expressed.

Some 10 recommendations arose as a result of that public hearing. Of those 10 recommendations, most were not controversial and my recollection is that the minister has acceded to the implementation of most of them in some form or another. The critical one, in respect of section 51 of the Constitution and reflected in clause 11 of the bill, was not agreed to. Having gone through that process, all in the interests of the artists of this country so as to ensure that we can provide them with the best possible legislation, I think it is unjustified for the member for Moncrieff to suggest that the minister is not acting on this matter fast enough. He is acting on it as quickly as possible given the circumstances.

Having completed that process, we now come to very heart of the bill: the taxation arrangements that apply to the collecting agency. Again, without this part of the bill in place, quite frankly, you cannot have the scheme—you must have the whole package. This is a separate part of the bill which, in effect, falls outside the minister’s jurisdiction because it is a Treasury matter dealing with taxation. Quite rightly, whilst this measure was part of the intent of the bill, it has to be drafted, brought to parliament and passed by parliament. Right now the original bill is before the Senate. It makes sense for this part of the bill to be debated in the Senate at the same time so that, when members debate the resale royalty legislation, they are debating the entire package. This part of it deals with the aspect of the bill which effectively says that the collecting agency should not be double-taxed—that is, the collecting agency is there to collect the funds and pass them on to the entitled artist or estate of the artist. It is not there as a profit-making body in the real sense and therefore, once the funds get to the collecting agency, they should not be taxed at that point. That is consistent with other royalty-collecting agencies here in Australia and, I would expect, across the world. The collecting agency will be appointed in accordance with the framework of the bill that we have before us. Once it is in place it will act, in a sense, as a clearing house for the royalty payments that are collected.

Under the bill, royalty will apply to artworks that are sold for in excess of $1,000. It will be a flat five per cent royalty and it will apply for 70 years after the death of the artist. Those provisions—the five per cent, the 70 years and the $1,000 value—are again reasonably consistent with similar resale royalty schemes that are available all around the world and will go a long way towards providing rightful funds to the artist. What we have seen for probably the last 100 years in this country is artists who produce very fine artworks getting very little out of them and yet others in years to come profiting handsomely from the works of those artists. It is only reasonable and fair that the artist, if there is an increase in the value of their works, ought to at least share in that increase in value—because it is their work.

There is another element to this and that is that, as we all know, many of the artworks that are sold in this country are sold to overseas buyers. If we do not have this scheme in place then neither will we have the reciprocal arrangements which allow Australian artists to benefit when their works are sold and onsold overseas. Other countries will not enter into reciprocal arrangements unless we have a scheme in place in Australia. So it is critical that we get on with doing this.

Some work was carried out with respect to the value of resale royalties to Australian artists some years ago. If my memory serves me correctly, it has been suggested that something like $6.75 million of royalties per annum—at least, that was the figure almost a decade ago—would be paid to artists based on the current rate of sales. That is nearly $7 million worth of funds that would go back to the artists, many of whom are struggling to continue to be artists because the funds that they get from the sale of their artworks are simply not sufficient to enable them to focus and commit themselves to being full-time artists, yet these artists are producing some of the best works around the world. In particular, many of these artists are from the Indigenous community—again, people who are certainly very talented, but they are not businesspeople. They do not necessarily have the best understanding of how to secure the best income from their art. It is my view that, over the years, many of those artists have perhaps been the most affected because of the lack of a resale royalty scheme in this country. Once the scheme is in place, the converse will apply. In my view, many of our Indigenous artists will have much to gain from having a scheme in place.

I said a moment ago that, in effect, this is simply the last aspect of trying to get this legislation through parliament. It is the missing link of the legislation and it is a taxation matter. The collecting agency will be appointed in due course. I understand that there are very clear guidelines with respect to how the collecting agency will operate. It will have to report on an annual basis the sales of artworks that it has registered with it. One of the good things about this is that once the collecting agency is appointed there will be a register, and everybody will be able to see and know exactly what works have been sold and for what value.

One of the issues that does arise—and I understand that it was raised in one of the submissions—is: if an artwork is sold and the artist has since passed on and there is no estate to which the royalty payment is to be made, who keeps those funds? That also raises the question of what happens to funds where even those who have paid the royalty cannot be located. Those are interesting questions, and it will be interesting to see, once the scheme has been in place over several years, whether there has been an accumulation of royalty payments that, for very good reason, cannot be passed on to the rightful owners. But certainly it gives both the agency and the government an opportunity to see how that aspect of it works. If there have to be changes made to the legislation with respect to that matter, I am sure that they will be made by the government of the day.

I have spoken on this bill on two other occasions, and I certainly do not want to go through the detail of the rest of it because I have done that on those occasions. I do say, in concluding my remarks, that this is a matter that has now been in discussion for some 30 years. It is time that we introduce a resale loyalty scheme. It was the Rudd Labor government that, on coming to office, immediately brought this legislation into the House. It is the Rudd Labor government that has been listening to the artists and taking their views on board both in the recommendations of the standing committee’s inquiry and in trying to resolve the differences on matters that the artists raised with the minister. Whilst that might have taken some time, at least the legislation is before us, thanks to the current minister. I commend the legislation to the House.

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

I am pleased to speak on the Tax Laws Amendment (Resale Royalty Right for Visual Artists) Bill 2009. This bill implements in part our 2008 budget commitment to introduce a resale right scheme for visual artists. Resale rights are about ensuring that artists share in the appreciating value of their artwork and obviously have particular relevance to Indigenous artists. There is not a lot of money in being an artist. Like emerging authors of fiction and many others in the creative industries, they are often told, ‘Don’t give up your day job.’ Thankfully, many artists and writers do not listen to this advice. They persevere and stick with what they have a passion for.

In their report Don’t give up your day job: an economic study of professional artists in Australia, the Australia Council for the Arts found that most artists earned less than $7,500 a year from their art despite the great contribution that they and their art makes to Australian society and culture. However, Indigenous art has enjoyed considerable growth in recent years, but unfortunately the Indigenous artists themselves have not shared in this growth. Back in 2002 cultural economist Hans Hoegh-Guldberg was commissioned to scope the value of Indigenous arts and crafts sales in Australia. He estimated that the total value of genuine Indigenous arts and craft sales at $100 million to $120 million a year, and half of these were in sales to overseas visitors. This is obviously good for our balance of trade and good for tourism as people go home with something they are happy with.

Unfortunately, while the value of Indigenous art is improving rapidly, little of the value of the art sales worth hundreds of thousands of dollars, and in some rare cases millions of dollars, is returned to the artist and the communities that created them in the first place. Often with Aborigines and Torres Strait Islanders, their stories and legends and images are collectively owned, but no benefit flows back to the Indigenous owner or the bigger mob that was responsible for the image. I am sure that for anyone with any common sense it does not seem right that a ritzy city auction house should continue to pocket a large cut of the value of Indigenous art for resales while the emerging artist is left with the distant memory in their pocket from the original sale.

In some cases the disparity between the original price and the on-sale price just a few years later can be staggering. For example, in July 1997 a Clifford Possum Japaltjarri painting sold for just $1,200 to some lucky person. Ten years later it sold at auction for $2.4 million, but obviously the painter did not receive a red cent as a result of the appreciation in the value of the painting. If a resale rights scheme was in place it would have ensured that Clifford Possum Japaltjarri would have shared a small percentage of the increased value of the work.

In government, the coalition commissioned the Myer inquiry into contemporary visual arts and crafts. The Myer report, which was released in June 2002, recommended the government introduce a resale rights for visual artists scheme but the Howard government failed to act on the recommendation. Maybe they were getting bad advice at the time, I am not sure. We do not know why, but they failed to act.

The guts of the resale rights for visual artists scheme is contained in another bill before the House and will introduce a far more equitable system that will ensure financial rewards for artists—

Jamie Briggs (Mayo, Liberal Party) Share this | Link to this | Hansard source

Mr Briggs interjecting

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

No, visual artists, not writers, member for Mayo—for any increase in value when their work is resold. This bill addresses the tax implications of resale royalties. It amends the Income Tax Assessment Act 1997 to regulate the tax treatment for payments made under the resale royalty right for visual artists scheme. It ensures that the resale royalty collecting society, which will be established by this scheme, will not be taxed for royalties it collects on behalf of the artist. Instead, the artist would include any royalty payment in their assessable tax income, thus making Mr Swan happy.

This process mirrors the system in place for copyright payments. Without these amendments, payments handled by the resale royalty collecting society would be subject to complex trust taxation rules. However, this would impact artists as they would become liable for tax on their royalties in the income year they became entitled to them rather than when they actually received the payment. Obviously there can be some delay between those events. The bill also amends the wording of the provisions dealing with the treatment of copyright income to reduce the complexity of the tax law. So it is not legislation that will make the tax lawyers happy, but thankfully they are a small minority.

The resale royalty right for visual artists scheme will ensure that money is directed back to the emerging artists, creating a new way for them to earn income and providing greater incentive for them to stick with their profession. Hopefully, it will mean that some of them will not have to give up their day job and that they will persevere and turn into great artists. Obviously, a lot of people out there in the suburbs are hoping to break into the art world, so hopefully this will give them a little income stream and make them persevere. This bill ensures that the scheme will be complemented by sensible and practical tax laws. I commend the minister for this legislation and I commend the bill to the House.

Craig Emerson (Rankin, Australian Labor Party, Minister Assisting the Finance Minister on Deregulation) Share this | Link to this | Hansard source

I would like to thank those members who contributed to this debate on the Tax Laws Amendment (Resale Royalty Right for Visual Artists) Bill 2009. In this debate we have heard from the member for Moncrieff, the member for Blair and the member for Makin. Also we have most recently heard from the member for Moreton, my friend, colleague, neighbour and touch footballing comrade. The bill amends the tax law to apply a streamlined tax treatment, to payments made in relation to the resale royalty right for visual artists, instead of the more complex trust taxation rules which would otherwise apply. This streamlined treatment replicates the way the tax law currently treats copyright payments handled by copyright-collecting societies. This bill ensures that a resale royalty collecting society is not taxed on amounts it collects on behalf of visual artists and holds pending distribution to them. When the artist or another resale royalty right holder, such as the artist’s heir, receives a payment from the collecting society, this amount is then included in the individual’s assessable income. Without these amendments the default tax treatment would be the application of the more complex trust taxation rules. Generally, this would mean that the artist would become liable for tax on his or her royalty amounts in the income year when they became presently entitled to them, rather than when they actually receive the payment. The bill also makes several minor technical amendments to the tax law. I commend the bill to the House.

Question agreed to.

Bill read a second time.

Ordered that this bill be reported to the House without amendment.