Category: Art

Art investing can serve many purposes. The obvious ones being the potentially high investment returns as well as the aesthetic value. There is also merit in considering this asset class from a tax and estate duty perspective.

Capital Gains Tax

• There is no capital gains tax (during and after your death) on art work purchased for personal use. That means, if you are not an art dealer, you will not be taxed for any gains made on the sale of your art. It is important to note, however, that SARS will have the final say whether your art collection is subject to the personal-use asset exclusion or not. The size of an individual’s art collection may be a factor.

Estate duty

• Upon your death, your art collection forms a part of your estate and will be subject to estate duty unless one of the following is done:
  • Leave your collection to the state or any public benefit organization
  • Lend it to the state, during your lifetime, for a minimum of 30 years

Other considerations

Commission

Most art galleries charge commission on art sold. This, however, is charged to the artist/seller of the art work and not the purchaser.

Insurance

If you value your art and envisage keeping it for investment purposes, it may be a good idea to have it insured. There are various insurance options such as accidental damage, theft, and shipment.

Storage

Whether you display the art in your home or place it in storage, you need to consider many factors that could potentially damage your collection. Mould, humidity, excessive sunlight etc.

Art investing isn’t a random exercise and should be planned for with the help of an expert. You’d do well to speak to the relevant specialists, such as art insurers, art dealers as well as tax and fiduciary specialist to ensure that your art investment is secure both physically and financially.

There is definitely a case for art investing given the recent investment returns of certain artworks. According to The Art Price, an art market information portal – ‘’The appeal of Art as an investment stems from the exponential value increases that affect certain works and, in certain cases, the media coverage they attract. 2017 saw plenty of examples of exceptional capital gains.’’

Average art investment returns globally are now in the double digits with an increase in the art buying population and the ease of flow of information being cited as some of the major drivers. A record was set recently with the highest amount paid for an art piece – The Salvator Mundi, one of Leonardo da Vinci’s paintings sold for an eye-watering, record-breaking $450 million in November 2017, at Christie’s auction house in New York. It was sold for $10,000 twelve years prior!

The local art market is also increasingly becoming popular with both South African and foreign buyers alike. Alfie Bester, one of the co-founders of the Citadel Art Index which measures the local art market, thinks that the South African art market is poised to catch up with what is happening abroad.   Gerard Sekoto, who is considered a pioneer of black South African art, comes to mind. One of his artworks titled ‘Portrait of a man’ sold for an impressive £380,750 (ZAR 7,169,847) against an estimate of £100,000-150,000 on 12 September 2018.

It is recommended that a potential art investor should first have an appreciation for art in general and actually like the artwork considered, long before the financial gain is calculated. This, in my opinion, can only come from exposure to the sector through regular interaction with artists, visits to galleries and museums and research of the history of art and as well as of the artists who’ve had a major influence on the art scene in the past. We are fortunate enough to have great spaces in the country that offer this opportunity.

Have a good week!