The Australian Government in 2007 committed to
introduce a resale royalty right for visual artists. A resale royalty, also
called a droit de suite, entitles an artist to receive a royalty payment from
subsequent sales of his or her artwork. The government argued that Aboriginal artists in particular will benefit from this resale right.
A resale royalty for visual artists has been debated in
Australia for many years, with varying levels of support. It currently exists in up to 50 other countries (estimates vary). The idea of a resale royalty for the benefit of Australia’s Indigenous artists was proposed by ATSIC in 1997 and endorsed in 1998 by the Australian Institute of Aboriginal and Torres Strait Islander Studies (AIATSIS).
Royalty schemes in other countries vary in content and coverage. Some countries have a flat royalty rate (France and Germany) while others have a
sliding scale (Belgium). Some countries have
thresholds before the rate takes effect (United Kingdom) while others impose
the royalty on the increased value of the artwork (Italy
and Brazil). Some schemes only cover living artists (UK) while others
cover the estates of artists up to 70 years after their death (France) (Source: House of Representatives Committee Report 2009).
Legislation to create a
resale royalty right in Australia and to establish a statutory scheme to
enforce the right and collect and distribute royalties came into force on 9 June 2010.
The Australian scheme has the following features:
- $1000 threshold
- 5% flat rate
- Single collection agency
- No upper limit
- Does not apply to the first resale or transfer of artwork following the
introduction of the scheme
- Does not include private sales between individuals, nor organisations not in the business of dealing in works of art
- Right continues until 70 years following the death of the artist
The resale royalty right applies to the resale of all artworks acquired after the law came into effect. Resales of existing artworks acquired after the right commenced, including works by deceased artists, are covered.
An example of the operation of the resale royalty has been given by the Commonwealth Arts Department:
In July 2011, 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.
Who benefits from the royalty?
The operation of the scheme was examined by a House of Representatives Committee before the legislation came into effect.
A number of critics claimed that the scheme will only benefit
the most successful artists and their estates and there is some auction sales data to support this view.
The government relied on modelling that was based on an assumption that all works resell at least once in a 10 year period. NAVA says that the government did not test this assumption against actual sales data and that few resales occur even within a 10 year period.
The Arts Law Centre of Australia and Viscopy both maintain that the average turnover of artwork is closer to 20 years. Analysis of the last 10 years’ auction sales by Viscopy shows that, for 94% of works, the period between resales is more than a decade: of works sold by auction in 1998, only 6% had resold by 2008.
If turnover of artwork is closer to 20 years, then the exclusion of existing artwork (clause 11) at the commencement of the scheme will result in only minimal benefits to most artists.
Other benefits from the royalty scheme
John Oster of Desart commented in evidence to the inquiry that:
"There will be now be a database that will be able to track the flow of works through the market, we’ll be able to see who is buying what and what they are paying for it. It’s not going to solve every problem that exists but the fact that there is more information in the market is going to help.”
The existence of this information will not only strengthen the operation of the royalty but also will be valuable for the operation of the Indigenous Art Commercial Code of Conduct.
Response to the Report by the Government
The Australian Government responded to the report of the House of Representatives Committee in late May 2009. Some of the recommendations of the committee were accepted but not all.
The Government considered the arguments in relation to Clause 11 but decided that: "If an artwork exists on commencement..., there is no resale royalty right on the first transfer of ownership of the artwork on or after commencement, even if the transfer of ownership is under a commercial resale."
This decision was made so that buyers of artworks are aware that a royalty may be payable if they choose to resell the work and to give the art market time to adjust to the scheme.
Another important issue was the possible exemption of the first resale under certain circumstances. The Committee report had recommended that Indigenous art
centres which pay their artists up-front for their work should be exempt from the
payment of the resale royalty for artwork purchased and resold within 12
months. The Government did not accept this recommendation on the grounds of administrative complexity and the fact that the $1000 threshold would eliminate many resales from
qualifying for a royalty payment under the scheme.
Administration of the Resale Royalty
The Minister for Environment Protection, Heritage and the Arts appointed the Copyright Agency Limited (CAL) to manage the resale royalty scheme.
The scheme will provide artists with a 5% royalty on commercial resales of $1,000 or more that occur after 8 June 2010. The sale price on the commercial resale of an artwork is defined as the amount paid for the artwork by the buyer on the commercial resale including GST, but does not include any other taxes or buyer's premium payable on the sale.
The royalty will apply to existing as well as new works, but will not apply to the first change of ownership after commencement, even if that is a resale.
CAL’s administrative fees are 10% of the royalties collected. The Agency has set up two advisory panels – one representing artists and the other representing the art trade - to ensure that the administrative processes work with current industry practices.
Sellers, buyers, auction houses, commercial galleries and art dealers are legally obliged to provide information to CAL about all commercial resales, including those that do not generate a royalty.
The information must be provided to CAL, in writing, within 90 days of the resale.
It must enable CAL to work out:
whether a royalty is payable on the resale;
the amount of the royalty; and
who is liable to pay the royalty.
CAL envisages that the data collected under the scheme will be useful for other purposes, such as provenance.
CAL has provided fact sheets for artists and for the art trade.
The resale royalty right appears to be well supported in principle on the grounds that it extends to visual artists the right to gain extended benefits in their work which already exist for other artists.
The legislation has implications for both artists and sellers of artworks. Artists need to become familiar with their rights and how the resale royalty operates. Dealers also need to be aware of their obligations.
Parties to the commercial resale of an artwork are expected to work out who will actually pay the resale royalty. Sellers, buyers and art market professionals are jointly and severally liable to pay the royalty, so it is important that buyers and sellers clearly record any agreement for the liability of payment of the royalty and that the collecting society CAL is notified each time a work is sold on the secondary market.
It appears that most Aboriginal artists are unlikely to gain much financial benefit from the scheme, apart from a very small number of the most successful artists or their estates, and there is some concern about the commercial impact of the scheme on some community-owned art centres.
On the other hand, the requirement for better and more transparent recording of initial and subsequent sale prices should be useful in supporting the operation of the Indigenous Art Code of Conduct.