The Australian art market has never recovered from the global credit crisis even though there a number of years after financial markets froze that the combination of Australia’s rich natural resources and proximity to a then still-booming China meant the Aussie economy was strong enough to keep the art market vibrant.

What seems to have killed Australian art prices was the government’s decision to change the rules for private retirement funds that held art as an asset. In Australia, those types of accounts were called Self-Managed Superannuation Funds (SMSF) and under the original rules buyers could hold their art at home as well as keeping it on their retirement account books as an asset.

Then the rules were changed in 2010 with a deadline of this year for compliance. Holders of art as an asset are now required to keep those works in storage. The increased fees and stricter rules turned many buyers off to art as an asset. Sadly, the market most affected by the rules change is the Aboriginal Art market.

The Australian Business Review spoke to dealer, accountant and advisor Michael Fox about what happened:

In 2009 Australian Taxation Office figures revealed the total value of collectibles, primarily art, in SMSF, was $700 million — by 2014 the figure was $385m and it is understood to have dwindled to a negligible amount since.

The art market has been decimated: prices for Aboriginal paintings, in particular, have plummeted. Fox has consigned for sale in his eponymous gallery two canvases by Utopia painter Gloria Petyarre, once among the nation’s most collectable indigenous artists. He bought them in 2005 for $5000 and is now endeavouring to sell them for $1000 each. “They’re beautiful”, he said, though he is yet to find a buyer.

The Petyarre owner will be lucky if he recovers 20 per cent of his original investment after consignment fees.

Another collector who spoke on condition of anonymity said he was considerably worse off, having spent $800,000 acquiring indigenous art in his superannuation fund.

He now hopes to realise $300,000 in a series of auctions this year as he liquidates all 300 works. “We tried to help the artists,” he said of his buying trips to remote art centres acquiring pieces he intended to house for decades in his superannuation fund.

“Now I’m selling them without ever really enjoying them, they went straight into storage, costing $35,000 to $40,000 a year,” he said.

Investment: art market painted into a corner (The Australian Business Review)