The Senate is expected to debate the Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017 (the Bill) in the sitting week beginning 15 October 2018. The Bill has a somewhat complex history, with the original Bill released in July 2017. Following considerable public debate, and a JSCEM advisory report, the Government announced proposed amendments to the Bill. On 20 September 2018 the Joint Standing Committee on Electoral Matters (JSCEM) announced an inquiry into the proposed amendments.
The original Bill had a primary objective of banning political donations from donors who were not Australian citizens or businesses, however it also contained a number of changes to the registration and reporting requirements of entities other than political parties engaged in political campaigning, and their ability to receive donations. The main effects of the proposed amendments are to remove a number of the more contentious provisions of the Bill.
This Flagpost focuses on the major remaining provisions and their effects on the Commonwealth Electoral Act 1918 (the Act). Note that this Flagpost is based on the exposure draft of the proposed amendments.
While the proposed amendment changes the commencement clauses, the Department of Finance has stated in evidence to the JSCEM that the intention is, if the Bill is passed, for it to apply for the next election.
Redefining ‘electoral matter’ and ‘electoral expenditure’
The amendment adds new definitions of ‘electoral matter’ and ‘electoral expenditure’ in order to clarify the scope of what is captured for the purpose of both reporting and claiming public funding for electoral expenditure. This responds to the JSCEM’s second recommendation resulting from its inquiry into the Bill.
Electoral matter is defined in proposed section 4AA and is generally material communicated for the dominant purpose of influencing how voters vote in a federal election. There are certain exceptions, such that communication including the reporting of news, satirical or artistic purposes, or private communications would not be electoral matter.
Electoral expenditure is defined in proposed section 287AB and includes, broadly, expenditure with the dominant purpose of creating or communicating electoral matter, or expenditure, in relation to an election. Expenditure in relation to an election is any expenditure incurred by or with the authority of a political entity in relation to an election, and hence is quite a broad category. Expenditure reimbursed through a mechanism such as a parliamentary entitlement is not electoral expenditure.
The supplementary explanatory memorandum exposure draft anticipates that the interacting definitions of electoral matter and electoral expenditure are likely to lead to some confusion, and provides a number of examples as to where they might and might not apply. In the public JSCEM hearing into the amendment there was considerable confusion expressed as to exactly how these provisions would work in practice. The Department of Finance committed to ‘go through the [Committee’s] report and where it seems necessary we will make … adjustments in the sake of clarification’.
Public election funding
Under the Act, public election funding is paid automatically on the basis of an indexed amount multiplied by the number of votes a party or candidate receives, for any party or candidate that receives more than 4 per cent of the votes in the election. The Bill provided that parties and candidates would be required to submit a claim in order to receive public funding, and that public funding would constitute a reimbursement for electoral expenditure, capped at the per-vote amount.
The main change from the Bill in relation to public funding (proposed section 296) is that candidates and parties that receive at least 4per cent of the vote will automatically receive $10,000 of public funding (even if their per-vote public funding entitlement is less than $10,000). Any public funding over $10,000 (up to the per-vote funding entitlement, which is unchanged save for indexation) will require a claim to be submitted to the Australian Electoral Commission (AEC) as to the electoral expenditure incurred, although the Bill leaves the AEC wide discretion as to what information will be required as part of the claim.
The Transparency Register
The Bill sought to create greater transparency in relation to political actors that were not political parties or candidates (which are currently classified in the Act as ‘third parties’) by requiring these actors to register with the AEC. The registration requirements for entities that incur electoral expenditure that are not political entities (that is, not political parties or candidates) was based on the amount of expenditure.
The amendment somewhat simplifies the categories of entities that are required to register with the AEC, and requires that the AEC maintain and publish a ‘Transparency Register’ (proposed section 287N). Entities that incur political expenditure that are not political entities are categorised based on their spending as either political campaigners or third parties.
Political campaigners are entities (other than political parties or candidates) which incur significant electoral expenditure ($500,000 in that or any one of the past three financial years or at least two thirds of the revenue of that entity in a financial year where that is $100,000 or more). Political campaigners must register to be placed on the Transparency Register within 90 days (proposed section 287F).
Third parties are defined as those who spent more than the disclosure threshold (section 287(1)) but who did not reach the expenditure amount to be classified as a political campaigner. Third parties are not required to register on the Transparency Register, but do need to lodge annual returns, as discussed below.
The Bill required that associated entities (which are entities that are controlled by, or operate wholly or to a significant extent for the benefit of, one or more registered political parties), register with the AEC, but also greatly expanded the criteria by which an entity could be classed as an associated entity. Under the Act, associated entities are required to report annually, but are not currently required to be registered with the AEC. Most of the changes in the definition of what constitutes an associated entity that the Bill would have introduced have been removed in the amendment, however associated entities will be required to register on the Transparency Register (proposed section 287H).
Incurring electoral expenditure while not registered may result in a civil penalty of up to 200 penalty units (one penalty unit is currently $210), or three times the amount of expenditure incurred whilst not registered.
Foreign political donations
The proposed amendments retain the key objective of the original Bill to ban foreign political donations, however they remove the possibility (provided for by the Bill) of banning donations from non-resident Australian citizens by legislative instrument, and reduces the penalties in the Bill for receiving or making foreign donations.
Foreign donors are defined in proposed section 287AA, and include a body politic of a foreign country, a foreign public enterprise or an entity that is not incorporated in Australia, does not have a head office in Australia, or whose principle place of activity is not Australia. Australian citizens and Australian residents are not foreign donors, nor is anyone who is enrolled to vote in federal elections.
Donations from foreign donors to political parties, candidates, and political campaigners of $1,000 or more could result in the agent or financial controller of the recipient being subject to a 200 penalty unit criminal penalty and/or a 200 penalty unit civil penalty if they do not take acceptable action (such as retuning the donation) within 6 weeks (proposed subsection 302D). Donations of any amount from foreign donors to third parties that are used for electoral expenditure may result in the recipient being subject to a 50 penalty unit criminal or 100 penalty unit civil penalty if they do not take acceptable action within 6 weeks (proposed section 302E).
Foreign donors who make a donation either to a political entity (with any intention), or to a third party with the intention of it being used for political expenditure, may be subject to a criminal penalty of 50 (for a third party) or 100 penalty units and/or a civil penalty of 100 (for a third party) or 200 penalty units if they do not take acceptable action within 6 weeks (proposed section 302F). Offences are provided for providing false evidence that a donor is not a foreign donor (proposed section 302G), and the appropriate information is set out for determining that a donor is not a foreign donor, such as the donor being enrolled on the electoral roll (proposed section 302P).
Penalty provisions in this and other new sections also allow for a penalty of three times the amount donated in contravention of the Act if that is more than the penalty unit derived amount.
The amendment does not restrict associated entities from receiving foreign donations, nor does it appear to prevent associated entities from making a donation to a political party which might include money sourced from foreign donations.
Annual returns and political expenditure returns
Under the amendments political parties and political campaigners have similar reporting requirements (proposed section 314AB), as do associated entities (section 314AEA), with political campaigners being required to report the amount of electoral expenditure incurred. Political parties, associated entities and political campaigners will have to report the political memberships of and any government grants received by senior staff.
Third parties must submit an annual return listing any political expenditure and a signed statement that they have not incurred political expenditure from any donations from foreign donors (proposed section 314AEB). Third parties who received any donations above the disclosure threshold must also provide an annual donations return (proposed section 314AEC).
Civil penalties are provided for failure to provide returns within 16 weeks of the end of a financial year.
Overriding state and territory political finance laws
Proposed sections 302CA and 314B seek to clarify the relationship between state and territory political finance laws with respect to restrictions on donors and disclosure of donations respectively. The effect of these provisions has been interpreted to be, generally, that in the absence of a donation being specified as being for state purposes by the donor, federal law applies rather than state law in relation to who can donate and, effectively, the disclosure threshold for that donation.
These provisions are new to this amendment, and the interaction with state and territory laws was not considered in the original Bill. These provisions have not publicly been recommend by or commented on by the JSCEM.
In a submission to the inquiry political finance law expert Professor Joo-Cheong Tham linked the provisions to the outcome of the Queensland Supreme Court decision in Electoral Commission of Queensland v Awabdy. As a result of that decision all political donations in Queensland were subject to Queensland’s lower $1,000 disclosure threshold, rather than the $13,800 federal disclosure threshold.
Commentators have questioned the workability of these proposals.
In evidence to the JSCEM constitutional law expert Professor Anne Twomey stated that the provisions had the potential to undermine state political finance laws that, for example, prevent certain classes of people being donors to state elections due to the risk of corruption.
The responsible minister is open to changing those provisions if recommended by the JSCEM, according to media reports.