- Political donations and electoral expenditure
- The need for reforms to the Commonwealth system of political donations and electoral expenditure has been apparent over successive inquiries conducted by this Committee and has been a matter of discussion and public debate in Australia and internationally.
- Australia’s electoral system is strong, however there are areas which are clearly in need of strengthening to improve transparency and integrity, reduce the potentially corrosive influence of big money and level the playing field, while allowing for continued participation in our elections from members of the public, political parties, civil society and business.
- It is evident when looking at democracies around the world and within our own electoral system that money has the potential to influence politics. If rules around political donations and electoral expenditure are not effective, political processes and institutions are potentially undermined, and the integrity of our democracy is threatened.
- While there has not been substantial reform to the Commonwealth system of political donations and electoral expenditure in recent years, many states and territories have now introduced reformed systems designed to improve transparency, accountability and provide for public trust in the system.
- Submitters to this inquiry highlighted key issues around transparency and integrity, calling for donation reform, and suggested that there has been general public acceptance for a number of years that change is needed at the federal level. They also highlighted the influence of big money and an electoral 'arms race', pointing towards the need for expenditure caps.
- This chapter will review the key areas of evidence for reforming Commonwealth electoral expenditure and political donation laws and highlight the need for serious reform of Australia’s system.
Political donation and expenditure schemes
2.7This section considers the evidence presented relating to the effectiveness of current arrangements and proposals for reform.
2.8The Commonwealth Funding and Disclosure Scheme was established in 1983 under Part XX of the Commonwealth Electoral Act 1918 (Electoral Act) and deals with the public funding of federal election campaigns and the disclosure of certain financial information and donations in relation to political actors and entities engaging in electoral activity.
2.9The scheme was introduced to:
- lessen the reliance of candidates and political parties on the receipt of private donations with the provision of public funding, and
- increase overall transparency and inform the public about the financial dealings of political parties, candidates and others involved in the electoral process.
- The AEC noted that Part XX of the Electoral Act has undergone several significant changes since its introduction in 1983 and highlighted that the Joint Standing Committee on Electoral Matters had conducted five inquiries into political funding and disclosure since 2010.
The AEC has stated on numerous occasions that the legislative design of funding and disclosure schemes are effectively political in nature and are generally the end result of negotiations between large numbers of stakeholders.
Accordingly, the AEC continues to observe that it is a matter for Parliament to decide on an appropriate scheme…The AEC’s role is to then administer the scheme in line with the legislation.
Financial disclosure requirements
2.11Beyond the current arrangements (as listed in the previous chapter), the AEC Transparency Register hosts the current register of entities, historic annual returns and election returns, and is a searchable database of financial disclosure information. It includes images of the original returns and a data-export function to enable users to undertake additional analysis of the data outside of the Transparency Register.
Candidates and unendorsed Senate groups
2.12Candidates and unendorsed (or jointly endorsed) Senate groups are required to disclose the total sum of donations received and used to fund their campaign, along with the number of donors and details of donations received where those donations total more than $14,500 from a single source. Details of electoral expenditure and discretionary benefits are also required.
Candidates endorsed by a registered political party may submit a ‘nil return’ and roll their reporting into the annual return for their party if those financial transactions were the responsibility of a party committee. Political party returns for the 2021-22 financial year will be released in February 2023.
2.13Senate groups endorsed by a single political party are not required to lodge a Senate group return, as their reporting is rolled into the annual return for their party.
2.14Donors must report donations totalling more than $14,500 made to an individual candidate or member of a Senate group. Similarly, donors must also report any donations they receive which total more than $14,500 from a single source that were used to fund donations to an individual candidate or member of a Senate group.
Challenges in administration of the current funding and disclosure scheme
2.15Recent legislative changes have given rise to several challenges for the AEC when administering Part XX of Electoral Act. The AEC stated that recent amendments to the Electoral Act introduced expanded definitions for the categories of significant third party and associated entities:
The changing nature of the way campaigns are run has seen new structures emerge to manage and/or fund campaigns. Many entities now meet the definition of both categories. This has caused confusion with stakeholders and results in a lack of clarity and transparency in reporting.
2.16The AEC noted that one issue that frequently arises ‘is who is required to register and who discloses the financial information if funding and/or expenditure is being carried out on behalf of a candidate or party’:
In some circumstances a strict interpretation of the Electoral Act could result in duplication of reporting. Duplication of reporting reduces clarity to users of financial disclosure information.
2.17The AEC argued that the creation of new reporting categories such as the Members of the House of Representatives and Senator disclosure categories, combined with existing reporting obligations for both federal election and annual returns, has ‘caused confusion with stakeholders’:
Specifically confusion around what financial information they are required to report and through which reporting mechanism.
This issue will exist particularly in the disclosure period directly following an election year due to possible duplication with annual return requirements.
2.18The AEC also outlined where penalties are to be imposed for offences against the disclosure provisions of the Electoral Act, these are ‘currently applied to an individual person occupying a position as opposed to an entity’ such as a political party.
For example, a penalty may be applied to a party agent, candidate agent or financial controller instead of a political party or associated entity. This limits the effectiveness of enforcement action (for example where the relevant person no longer holds that position in the entity) and potentially unfairly burdens an individual with responsibility for what may be the collective actions of an entity.
Definition of electoral matter and electoral expenditure
2.19An area of complication in definitions and understanding for stakeholders and observers arises when considering ‘electoral matter’ and ‘electoral expenditure’; this has relevance in practical terms to regulations around spending and communication. In some public debate, the specific applications of these terms are not always clearly explained or well understood.
2.20In debates around electoral expenditure, there is often conflation of purposes – whether discussion or consideration relates to expenditure or activities related to an election campaign; or whether in more general terms (and in a commonly understood sense, related to parties) for administrative operation. Recognising the complexity of these points, the AEC has produced a factsheet to clarify the terms and concepts.
2.21The Electoral Act regulates electoral matters that are communicated or intended to be communicated in the following ways:
- certain communications containing electoral matters will require an authorisation to enable voters to know who is communicating the matter; and
- expenditure incurred for the dominant purpose of creating or communicating electoral matter (electoral expenditure) will have to be reported to the AEC.
- Electoral matter is defined in the Electoral Act as matter communicated or intended to be communicated for the dominant purpose of influencing the way electors vote in a federal election. Unless the contrary is proved, the dominant purpose of a communication is presumed to be electoral matter, if the matter expressly promotes or opposes:
- a political entity, to the extent that the matter relates to a federal election; or
- a member of the House of Representatives or a Senator, to the extent that the matter relates to a federal election.
- The dominant purpose is intended to capture content that includes matter that seeks to influence:
- the order in which a voter indicates their preferences on the ballot paper; and
- a voter’s choice of whether to cast a formal ballot paper.
- The Centre for Public Integrity (the Centre) has called for a broader definition, noting:
That means essentially the sole purpose of it is to influence the way an elector votes. That was changed, I believe, in 2018 from a definition of 'likely to influence the way an elector votes'. We believe that it should be broadened. Obviously, there is a greater disclosure obligation on electoral expenditure if you broaden the definition. But we believe that in order to capture third parties we do need to broaden that to matters likely to affect an elector in the way that they cast their vote. Obviously, that may cause some complications for the parties.
2.25The Centre believed the Canadian definition for election expenditure for third parties also has some merit:
That definition essentially means that it is spending on a position that a party or candidate has taken, which essentially allows parties and candidates to set the tone, and then if large third parties want to contest on that field then they will incur electoral expenditure.
2.26The Human Rights Law Centre (HRLC), however, expressed reservations about Centre's suggestion to ‘broaden the definition of 'electoral matter' to something similar to what it was before’:
Just a word of warning that that provision was almost impossible to comply with as a third party. I wrote to the Electoral Commission asking how on earth I was supposed to assess whether or not something might influence voters in an election. There was no time period. When does an issue become an election issue? My experience was that nobody had any sense or any guidance of what meaning to give to that law. So while the definitions of 'electoral matter' and 'electoral expenditure' are complicated and in some respects fairly narrow, they were agreed on after a long arduous period of consultation. It has taken people a long time to get across them, so we are very reluctant to open that up again.
2.27Submitters raised concerns about the lack of transparency around the disclosure of political donations at the federal level. Many were concerned about the length of time it takes for any information on donations to be released to the public and the amount of private funding sources for the major parties that are either undisclosed or ‘other receipts’.
2.28Submitters put several proposals for reform in this area including advocating for the real-time disclosure of political donations; amending the donation disclosure threshold; banning donor industries; as well as further regulating political fundraising.
2.29This section sets out the current rules regarding political donations, along with suggestions for how they could be improved. Submissions reflected the community’s expectation that political donations are transparent, timely and reduce any possible risk of corruption.
2.30The Committee received significant and constructive evidence as to why change is needed, including the need for improved transparency. The Committee has considered the details of some proposals received, including those relating to:
- real time disclosure, and the acknowledgement that there is value in introducing laws in this area
- lowering the donation disclosure threshold to $1,000
- potential capping or banning of donations.
Background on political donation laws
2.31The Committee does not intend to revisit in detail earlier work on the current disclosure regime, noting that an overview was provided in its December 2019 advisory report on the Commonwealth Electoral Amendment (Real Time Disclosure of Political Donations) Bill 2019. That report included coverage of annual disclosure requirements, and the penalties relating to funding and disclosure regulations.
2.32The Committee’s reports on the conduct of the 2016 and 2019 Federal elections also provide an overview on political donations – and demonstrate that calls for reforms in these areas are not new.
2.33As already noted, from 1 July 2022 to 30 June 2023, the ‘disclosure threshold, the amount over which donations must be disclosed’ is $15,200. Under the Electoral Act the threshold is indexed to the Consumer Price Index (CPI).
2.34Annual returns must be lodged with the AEC by political parties, their state and territory branches and associated entities by 20 October each year. The AEC publishes Annual returns ‘on the first working day in February each year.’
2.35The Parliamentary Library’s quick guide, Election funding and disclosure in Australian jurisdictions, noted that ‘as of 1 December 2020, donations must be deposited into a federal campaign account to be covered under the political finance laws (which are generally less prescriptive than state or territory laws).’
2.36Additional election funding and disclosure requirements under the Electoral Act include:
- significant third parties and associated entities must register with the AEC
- returns must disclose the full name and address of the donor, the amount received, and whether the receipt is a ‘donation’ or ‘other receipt’, for amounts above the threshold
- people and organisations who make donations to members of parliament or to candidates or parties in excess of the threshold must submit an annual donor return
- third parties must lodge an annual return if they spend more than the threshold in a financial year
- independent candidates, unendorsed Senate groups and Senate groups endorsed by more than one political party must submit an election return outlining the total value of donations received, the number of donors, any individual donation that is above the threshold, and electoral expenditure incurred between the issue of the writ and election day.
- Political parties, associated entities, donors, third parties, candidates and Senate groups are able to lodge their annual and election returns through the eReturns portal, sent through the post, faxed or emailed directly to the AEC.
- The AEC is required to publish annual returns, election returns, enforceable undertakings and election funding claims on the Transparency Register.
- The Parliamentary Library pointed out that, while the ‘AEC undertakes a range of compliance reviews to ensure the accuracy of political parties returns [which] occasionally result in amended returns’, it rarely employs ‘the coercive powers it has in relation to compliance or initiates prosecutions in relation to funding and disclosure obligations (a practice which has been criticised by the Australian National Audit Office).’
- The Electoral Act, as part of the legislative changes made in February 2022 with the Electoral Legislation Amendment (Foreign Influences and Offences) Act 2022, also extends the ban on foreign donations.
- Political entities, members of Parliament, Senators, significant third parties and associated entities are restricted from receiving gifts of $100 or more from a foreign donor and restricted from receiving gifts over $1,000 without obtaining a written affirmation that the donor is not a foreign donor. They are, however, ‘permitted to receive foreign donations under certain circumstances – for personal use or to be used for purposes that are not related to a federal election’.
- Further, the ‘Electoral Act establishes civil and criminal penalties for receiving prohibited foreign donations and not subsequently taking acceptable action in relation to the donation.’
2.43Political donation and expenditure schemes in New South Wales, Queensland and South Australia have been successfully enacted and administered for a significant amount of time and provide a template for how to address political donation issues at a federal level. These are included at Appendix C.
2.44The varied legislative requirements for associated entities in several jurisdictions, Queensland, New South Wales, Victoria, South Australia and Western Australia, can however potentially cause confusion between federal and state/territory requirements.
2.45In Queensland, the spending of an associated entity is counted towards the candidate or political party’s electoral expenditure, to ‘prevent the proliferation of associated entities and circumvention of the spending cap’. Associated entities must use the campaign account of the party they are associated with.
2.46In NSW, all donations made must be disclosed by parties, groups, candidates and associated entities. These bodies must also be registered with the NSWEC to accept political donations or incur electoral expenditure. Associated entities are subject to the same reporting requirements as parties, and their electoral expenditure is aggregated with the party that they are associated with.
2.47In Victoria, associated entities, alongside parties, candidates and third parties must maintain a state campaign account from which they can pay for political spending, and donations must go into these accounts. Donations to associated entities and third parties that are not intended to be used for political expenditure and are not paid into the campaign account are not subject to the donation cap. Expenditure of associated entities and third parties is only considered electoral expenditure if incurred during the election campaign period (within approximately two months from election day).
2.48In South Australia, associated entities are not required to maintain a campaign account. Any donation, gift or loan of associated entities, third parties, parties or candidates over the $5,576 threshold must be declared to the electoral commission, and gifts of $200 or more must be recorded.
2.49In Western Australia, associated entities, alongside parties, candidates, third parties must submit annual and election returns. These returns for associated entities and parties must include the value of all gifts and income received, and details of gifts over $2,600.
Donations in the 2022 election
2.50In the 2022 election, former MP Clive Palmer’s mining company Mineralogy donated $117 million to his United Australia Party in the 2022 campaign:
This breaks his own previous record of $84 million in the lead up to 2019 election, and dwarfs all other donations on record.
Anthony Pratt’s paper and packaging company Pratt Holdings was the next largest donor in 2022, at $3.7 million, with the funds more or less evenly split between the Coalition and Labor.
2.51The Grattan Institute noted most of the major donors to Labor were unions, who collectively contributed more than half of all Labor’s declared donations.
Labour Holdings, an investment arm of the party, was also a major contributor, and Pratt Holdings was the largest individual donor for Labor.
2.52By contrast, the Grattan Institute noted most of the major donors to the Coalition were ‘wealthy individuals and corporate donations funnelled through fundraising entities associated with the Liberal or National parties’.
The Coalition’s top five donors accounted for more than a third of their declared donations and included $3.9 million from the Cormack Foundation (an investment arm for the Liberal Party). Other big donors to the Coalition included Sugolena Holdings, owned by businessman and investor Isaac Wakil, and Jefferson Investments.
2.53The 2022 federal election was particularly significant due to the rise of independents who were the recipients of donations from a significant third party – Climate 200, a crowdfunding initiative with over 11,000 Australians who provided donations. Climate 200 raised about $13 million which was donated to selected independent candidates. Wealthy individuals also donated substantial amounts to Climate 200. Of that $13 million, $2.5 million was donated by Atlassian founders Scott Farquhar and Mike Cannon-Brookes and $1.85 million was donated by Mr Rob Keldoulis.
2.54The Parliamentary Library highlighted the challenges of the current political finance laws to effectively capture the political finance activities of independent candidates at the 2022 federal election:
… the current reporting requirements for candidates appears not to have anticipated the campaigns run by some of the independent candidates in the 2022 federal election that involved sophisticated and expensive campaigning infrastructure and large amounts of money raised through donations. The complexity of the system also makes it difficult for independent candidates to be compliant.
Real-time donation disclosure
2.55A significant number of submitters to this inquiry supported the introduction of a real-time disclosure framework. While not expressing a particular view on a definition of what would constitute real time disclosure, overall many participants agreed that real time disclosure laws were worthwhile and should be introduced.
2.56The Centre highlighted that currently there is no agreed definition of what constitutes real-time disclosure across jurisdictions in Australia but that it was important that it be introduced:
Requiring the disclosure of donations to be as proximate as possible to their making is an important scrutiny measure: it enables interested parties to examine whether there may be, for example, a correlation between the making of a donation by a donor, and the making of a controversial regulatory decision in that donor’s favour by the donee.
2.57The Australia Institute called for increasing transparency around the funding of parties and candidates, stating it would enable Australians to make more informed choices:
Knowing that large donations have taken place and knowing whom they're going to and what patterns there are would help give us a much better idea of what level of support different groups and parties have, any concerning patterns and so on. So starting with better transparency would give us the tools we need to answer those other questions about the prevalence of large donations and the effect they might be having.
2.58The HRLC, Hands off Our Charities Alliance, and GetUp agreed that real-time, or close to real-time, disclosure should apply to all candidates, political parties and associated entities. The HRLC added:
Voters should know ahead of casting their ballot who is bankrolling the election campaigns of candidates and political parties. Knowing the timing of a donation can also be informative outside of election years: for instance, additional public scrutiny may follow a government tender process if it is known that corporate applicants made large political donations in the days prior.
2.59Professor Anne Twomey stated that real time disclosure would increase:
… transparency concerning political donations and make it more difficult to hide the sources of financial support to parties. But that, in itself, is not enough. Anti-avoidance measures need to be enhanced so that transparency cannot be easily circumvented.
Timeframes for disclosure
2.60The AEC acknowledged that the current timeframe in which donations are disclosed is an issue:
… the real issue is the timeliness with which we are legally able to make those donations known. From our perspective, if it's 18 months before citizens get to understand where money came from, based on those principles that would seem to be a bit odd. That's from our perspective, and I'm just feeding back the pub test that citizens tell us. I think there's is a problem with that issue. I know this committee will come up with an actual level of the money that they think represents community standards, which is great. If I just talk about timeliness, I'm not sure that I could sit here and tell you that a system that I'm sitting on top of that takes, in some cases, 18 months for stuff to be declared meets that definition of timeliness.
2.61The Committee notes the different expectations of how quickly the disclosure should be required under a ‘real time’ disclosure system – whether within a day (24 hours), 5 days, 7 days, or 21 days. The Centre recommended that ‘real time disclosure of donations should mean ‘disclosure required within 7 days except in election periods where it should be required within 24 hours.’ The community group ‘Curtin Independent’ suggested ‘real-time disclosure (by both the donor and a recipient) of financial and other donations within a short time of say 7 to 14 days of receipt’ via an online system.
2.62The Accountability Round Table (ART) suggested that further safeguards could include:
- requiring disclosure by both donor and recipient or
- requiring all donations to go through an independent agency which will only pass on donations pursuant to the relevant electoral rules and from permitted donors.
- As noted above, other jurisdictions such as South Australia, Queensland, New South Wales, Victoria, and the Northern Territory have introduced political donation reporting either within 5, 7 or 21 days. The ACT Government stated that it ‘made a commitment … to introduce ‘real time’ political donation reporting within seven days of receipt of a large donation.’
Means of lodging – and consistency across jurisdictions
2.64In terms of means of lodging information, the Committee notes the various suggestions for online methods. The Australian Conservation Foundation (ACF) advocated for real time disclosure which ‘should be done via an online portal which is easy to navigate and accessible to the public.’ Mr Ian Millner suggested that current technological advances enabled donations to be disclosed in real time or on a daily basis, and that information should be provided in a more accessible format for detailed analysis. The Committee also acknowledges the view that donations should not only be disclosed in real time but also published on the respective party and AEC websites.
2.65Dr Monique Ryan MP, Member for Kooyong, commented that it was important to mandate ‘real time notification of donations wherever possible via an online reporting system which needs to be user-friendly and not too burdensome’, adding:
It is important to remember that, even in 2022, not all donors are able to make online donations. For independent candidates and small parties, notifications of non-online donations would be a significant workload — I’d support giving all parties 21-28 days to register such donations.
2.66In terms of lodging information, consideration could be given to establishing consistency between the Commonwealth, States and Territories, for example through the operation of:
… a single, simple online portal for lodgement of all donations information at both levels of government, which data could then be drawn on by regulators at both levels of government to ensure compliance with each jurisdiction’s regime … if done neatly it will reduce the burden on political party campaign staff (often volunteers) in entering the data needed to comply with all their legal obligations.
2.67The Committee notes advice from the AEC that if a near to real time disclosure regime were to be legislated, it would require a significant investment in the AEC systems. In terms of additional resources to ensure compliance by parties and candidates, a common theme raised was the need for additional administrative funding to allow parties and candidates to implement the disclosures.
2.68The Australian Labor Party believed that a form of real-time disclosure would increase the regulatory and administrative burden on parties and that:
… in most, if not all, states and territories where real-time disclosure regimes have been introduced, they've been complemented by additional administrative support to the parties in the form of additional administrative funding to enable compliance.
2.69The NSW Nationals were ‘not supportive of real-time disclosure without increased funding to accommodate the administrative burden.’ They added that ‘should the administrative burden associated with disclosure be increased there would be a requirement for consideration of administrative funding to enable participants to meet these obligations.’ They posited that a ‘reduction of the disclosure threshold would inevitably result in a reduction in the number of donors, and in the amounts which the donors would be prepared to give’, adding:
Reducing the number of political donors would have serious consequences for the ongoing operation of the smaller political parties such as The Nationals. Such a reduction would need to be countered by a serious consideration of the need to supplement this financial loss through increased public funding.
2.70The Liberal Party of Australia expressed that they did ‘not support changes to these arrangements that would unreasonably add to the already considerable administrative and compliance burdens placed on political parties, which includes the simultaneous application of Commonwealth and state or territory laws to party divisions.’
2.71The Liberal Party went on to caution against implementing a real time disclosure regime, commenting that it could potentially ‘lead to greater harassment and bullying of individuals and small businesses that wish to participate in our electoral process by supporting a candidate or political party’ if their details were available online. They suggested that careful consideration be given in designing a real time disclosure regime ‘to ensure that the requirements are reasonable and make necessary allowance for public holidays, staff leave, and the time needed for the legally required due diligence associated with the receipt of payments.’
2.72The Liberal Party also ‘noted that where schemes to cap political expenditure and impose ‘real-time’ disclosure have been introduced in other Australian jurisdictions, they have been accompanied with administrative funding being provided to political parties to assist with the significantly increased compliance burden, significant technology upgrades, and additional staff required.’ They added that ‘significant lead-in periods have also been put in place in other jurisdictions to give political parties the time to establish new reporting systems.’
2.73The Democratic Audit of Australia (DAA) supported the need to factor in some administrative funding around donation, spending and funding reforms as quite justifiable, as they noted is done at the state level for elections in New South Wales and Victoria. However, they cautioned that it should be implemented so that incumbency advantage is not increased and provisions are made for parties that have no elected members.
2.74The Australian Charities and Not-for-profits Commission (ACNC) also raised concerns about a possible additional administrative burden:
… [if] there is movement towards ‘real-time disclosure’, consideration will need to be given to whether the ACNC is expected to update the Charity Register in real time to reflect a charity’s recent electoral expenditure, and whether its current resources and systems allow that. Any required disclosure of this nature will be an impost on charities through additional regulatory burden.
2.75The Australian Council of Trade Unions while supportive of ‘sensible and targeted measures to increase transparency in our political system’, were ‘mindful of the impact that such measures could have on smaller organisations in terms of increased compliance and reporting burdens.’
Lowering the donation disclosure threshold
2.76Submitters were by and large supportive of political donation reform at the federal level. Primarily, submitters who supported the introduction of real time disclosure of political donations also recommended lowering the donation disclosure threshold. Views on the amount a threshold should be set at were varied. Some inquiry participants suggested specific amounts, for example, to $1,000. Others suggested a reduction to $2,500 for third parties and significant third parties. Some inquiry participants proposed that consideration be given to setting caps within a range.
2.77While generally supportive of current levels being lowered, many inquiry participants did not propose a specific amount; instead being supportive of the principle, and the result that any lower threshold would have benefits. Senator Pocock, for example, supported ‘significantly lowering the disclosure threshold as a necessary complement to closer to real time disclosure to greatly increase transparency’. Some participants referred to a ‘reasonable’ level – and advocated for a mix of public funding and capped donations from the community.
2.78The Centre was of the view that the current disclosure threshold was high and not commensurate with other Australian jurisdictions:
With Australian political parties declaring $1.38 billion in income of unexplained origin between 1998/99- 2020/21, it is beyond contestation that the Commonwealth’s high disclosure threshold is creating a transparency void. For the 2020/21 financial year alone, 38.6% of parties’ income – or $68,265,479 – was of unexplained origin.
Not only is the high Commonwealth disclosure threshold flooding Australia’s political system with hidden money, it is also significantly out of step with the thresholds for disclosure set by the states and territories.
2.79The Centre recommended reducing the threshold to $1,000 (indexed) for individuals and ‘aggregated donations of $3,000 over 3 years to political parties, candidates, associated entities, third parties and significant third parties being required to be disclosed.’
2.80Professor Luke Beck believed that the ‘threshold for disclosure is extremely high, so a very small proportion of political fundraising is ever disclosed under the federal regime.’ He suggested that the threshold be set at $1,000, with every amount above that threshold (as a cumulative total) being declared, adding ‘that way there's full transparency, full daylight and nobody can make accusations’.
2.81Professor George Williams called for a level playing field with the same rules for parties and third-party campaigners suggesting that a threshold of $1,000 was too low and that around $5,000 was a more appropriate level.
2.82Several submitters argued that reduced disclosure thresholds should be combined with limits to donations; or that thresholds should be fixed:
That disclosure threshold be $1,000, and that donations be limited to a maximum of $5,000 ‘(with no opportunities for additional payments to be made by other means);’ or
Having a fixed threshold, rather than an inflation indexed threshold does increase the level of transparency over time but does potentially provide future governments wanting a higher threshold with greater argument to increase the threshold by an amount potentially significantly higher than the cumulative inflation since the fixed threshold was set.
2.83Vote Australia Incorporated did not object to a $1,000 (indexed) threshold but preferred ‘that all financial donations and donated professional services to candidates, politicians and political parties, regardless of value, be disclosed.’
2.84The National Party of Australia commented that ‘lowering the disclosure threshold to $1000 would have a twofold effect – increasing the administrative burden on political participants and deterring possible donors from participating in elections and democracy.’
2.85The NSW Nationals provided some insight into challenges that they have in complying with the New South Wales donation disclosure laws:
Sometimes the noble goal of trying to increase transparency and accountability becomes more challenging when you actually have to administer these things. In the New South Wales system the administrative burden is significant. There is a really, really high bar to jump over in terms of expenditure tracking, in terms of donation tracking. I'm not suggesting that the administrative burden is a reason not to implement changes like this, but what I am suggesting is that if the committee intends to make recommendations on these things that the administrative burden—for example, in my office in New South Wales about 60 per cent of our staffing level is allocated to compliance with the law. We have teams that monitor all of our financial obligations, all of our Electoral Act obligations. Down to the point of running a small event, it all has to be run through here.
2.86The Hands of Our Charities Alliance were also generally supportive of lowering the disclosure threshold but voiced concerns that a $1,000 threshold was too low for charities and community groups and would act as a disincentive to donors and place an additional administrative burden on those groups:
Charities and not-for-profits often do not have a relationship with regular small donors who give up to $1,000 cumulatively across a year such that the electoral law donation disclosure requirements can be clearly explained. In addition, donors of relatively small amounts to charities would reasonably not expect their personal details to be made publicly available. Requiring charities and not-for-profits to contact a vast number of small donors to seek permission to have their details made public on the Australian Electoral Commission’s website would not only impose an administrative burden on them, but would discourage many people from donating to their favourite charities.
2.87They contended that a lower threshold would also make compliance harder and risk of accidental breach more likely, suggesting that a threshold of $2,500 would ‘go a significant way to alleviating the administrative burden on charities and not-for-profits without compromising political integrity.’
2.88The ACNC also raised concerns about lowering the threshold and the potential impact that it could place on charities:
The ACNC does not have a view on the correct setting for the disclosure thresholds. The ACNC generally prefers transparency and acknowledges that there may be genuine public interest in charities incurring electoral expenditure below the current disclosure threshold. However, lowering the threshold may create an additional reporting burden for some charities to the AEC. Easing the administrative burden for charities is a key objective of the ACNC, recognising that it is preferable for their time and resources to be directed to charitable endeavours.
2.89Noting the reliance that charities and not-for-profits have on donations, the HRLC stated that donation caps should not apply to these entities as ‘many would be prevented from doing important advocacy while corporations and industry groups would be able to continue drawing on other income.’
2.90The Grattan Institute suggested that the current threshold be lowered to $5,000 to protect the privacy of small donors:
This would protect the privacy of small donors, and keep administration costs manageable, while ensuring that all donations big enough to matter are on the public record.
2.91FamilyVoice Australia concurred that the privacy of citizens and businesses who make a donation should be protected, supporting a higher donation disclosure threshold. They contended that ‘three criteria for determining an appropriate threshold are: preserving donor privacy, limiting compliance costs, and safeguarding the public interest.’ They proposed that the threshold be determined by reference to a fixed proportion of the total donation income raised, claiming that this would:
- safeguard the public interest by ensuring that a fixed proportion of the donation income raised is subject to public disclosure; and
- adjust the threshold to compensate for changes in donor generosity affected by changing salaries, living costs and other economic factors.
- They recommended that the ‘annual threshold for disclosure of political donations should be based on the previous year’s returns so as to ensure that a fixed percentage, between 90 and 95%, of total donations are disclosed.’
Donation caps or bans
2.93Several submitters advocated for the banning of donations from certain industries, capping donations, banning donations altogether, or capping an individual’s ability to make multiple donations. As a basis for its deliberations, the Committee observes the advice from Professor Twomey, which noted that the High Court had ‘previously acknowledged the validity of caps upon donations and expenditure, as long as the imposition of caps does not unduly burden the implied freedom of political communication.’ She elaborated that:
Limits on expenditure and donations can support, rather than burden, the implied freedom of political communication by ensuring that the voices of the well-resourced do not drown out a variety of other voices in the political sphere (see McCloy and Unions NSW (No 1) and (No 2).
2.94The ART submitted that there ‘is a respectable case for banning corporate donations on the basis that they are either for corporate benefit (which makes them corrupt) or not (which makes them in breach of their duties to shareholders)’ and also suggested prohibiting unions from making donations to political parties.
2.95The Australian Greens called for prohibiting donations from specific industries:
… with a track record of seeking political influence, industries that perhaps subvert decisions made by parliamentarians in the public interest: fossil fuel companies, banking industries, pharmaceuticals, weapons manufacturing, alcohol, tobacco, gambling, property development, industries that have a conflict of interest as far as decisions made by the Parliament of Australia are concerned. We reiterate our long-term call to ban those donations.
2.96Real Republic Australia questioned whether donations from ‘other classes of individuals or commercial interests who may stand to gain from influencing decision-making or decision-makers’ should be prohibited, adding:
We would submit that the expectation of donors for either favourable treatment, or at least having their concerns listened to, will exist no matter what donation thresholds or other rules are applied.
2.97The variety of views put to the Committee on this issue include that:
- donations from specific business sectors for which there is clear evidence of association with harmful products, services, or industrial processes’ be banned;
- restrictions should be placed on donations or donation caps to third parties acting on behalf of harmful commercial industries.
- donations from corporate entities be either limited or eliminated;
- donations from the fossil fuel and gambling industries be banned or heavily limited, or that big, corrupting financial contributions to politicians be banned altogether; and
- noting that NSW has banned donations from gambling, tobacco, and property development industries, this be extended to fossil fuel companies and possibly all for-profit entities.
- Professor Williams stated that rather than banning industries from donating, his preference would be to ‘reduce the amount that can be donated rather than targeting specific industries, unless it's a particularly extreme case.’
- The HRLC called for banning large political donations altogether:
While transparency is vitally important, only banning large political donations altogether can effectively stop the influence of money in politics.
Donations to candidates, political parties and associated entities should be capped at between $15,000 and $30,000 (indexed, to account for inflation), aggregated across a financial year.
2.100The Centre recommended the implementation of donation caps set at $2,000 per annum per candidate and $5,000 per party, from a single person or entity (aggregated), and noted that the High Court had upheld the constitutionality of NSW laws imposing camps on political donations:
The High Court has recognised the utility of donations limitations, holding in its 2015 McCloy v New South Wales (‘McCloy’) decision that ‘[t]he risk to equal participation posed by the uncontrolled use of wealth may warrant legislative action to ensure, or even enhance, the practical enjoyment of popular sovereignty’. This judgment – which upheld the constitutionality of NSW laws imposing caps on political donations, banning donations by property developers and prohibiting indirect campaign contributions – specifically recognised that the donations caps in question did not impede the system of representative government provided for by our Constitution; but preserved and enhanced it.
2.101The Centre noted that donation caps are currently in place in QLD, NSW and Victoria, positing that a lack of federal regulation was posing an undue risk:
The absence of donations caps at the federal level means that well-resourced individuals and entities have an opportunity to buy undue influence and access. The public is aware of this risk, and as a consequence the absence of caps also has a deleterious impact upon fraying public trust: public trust in democracy requires that impartiality in government decision-making not only exist but be seen to exist.
2.102When discussing the possibility of introducing a donor cap to limit a donor’s ability to make multiple donations to either the parties or candidates, Dr Belinda Edwards and Professor Williams agreed that, providing there is evidence that it is an issue, it might be worthwhile to limit donors from making multiple donations. Dr Edwards added that individuals ‘should probably only be able to support a certain number’ of unincorporated groups.
2.103The Grattan Institute also raised concerns about the current ability for ‘a single donor to make multiple donations under the threshold, which collectively exceed the threshold, and still not be identified.’ They added:
Most states and territories prevent donations splitting by requiring political parties to aggregate small donations from the same donor and declare them once the sum is more than the disclosure threshold.
2.104The Grattan Institute called for the prevention of donation splitting recommending that ‘donations from the same donor to the same party, over say $100, should be aggregated and disclosed by the party once the combined total exceeds the disclosure threshold.’
2.105Climate 200 agreed that there should be measures put in place to avoid donation splitting:
We note that there is some confusion; there are some players in the political system who believe that multiple donations can be made to the same entity under the disclosure limit. ... I think it's a very important principle that donations should be aggregated across all the associated entities that fund a particular organisation and that there be real-time disclosure. That would close that loophole, which we suspect is being used quite extensively.
2.106The Australia Institute suggested that the ‘threshold should be defined so donors cannot avoid it by splitting donations over time or between branches of a party.’ The Centre also recommended that any caps on donations relating to companies are aggregated:
Any donations cap regime must also ensure that the donations of related companies are aggregated. For example, under s 9(8) of the Electoral Funding Act 2018 (NSW), related companies are treated as a single entity (and whether entities are related is a question to be determined by reference to the federal Corporations Act 2001 (Cth).’
2.107Some submitters raised concerns around the potential for parties to aggregate or pool donations as it could potentially give ‘them an unfair advantage in target or swing seats at the expense of independent candidates or campaigns in safe or unwinnable seats.’
2.108The AEC stated that there is no evidence that donation splitting is occurring on a widespread basis and that the current legislation requires donors to disclose when they make multiple donations:
… in terms of pure donations or gifts, if a donor makes multiple donations below the threshold to a single entity the donor does have to disclose that in a return. The entity itself may not.
2.109The DAA called for a limit on donations:
Freedom of political expression is promoted both by encouraging small donations through, for example, tax deductibility and by preventing some voices drowning out others through placing a limit on donations and campaign expenditure. While Australia has in place tax deductibility for individual donations to registered political parties or Independent candidates of up to $1500, in line with the goal of encouraging small donations, this is not balanced by a limit on large donations.
2.110Submitters including the Centre and Professor Williams accepted that there was a case for exempting party memberships from donation caps, with appropriate checks and balances in place. Professor Williams believed that ‘it’s appropriate you allow things like some low-level membership fees.’
2.111This inquiry considered the other avenues in which political parties, independents and candidates raise money such as fundraising dinners, gifts, raffles, sponsorships and other events.
2.112The Grattan Institute highlighted that more than 80 per cent of private funding sources for the major parties are either undisclosed or other receipts, ‘and these categories are ambiguous’ (Figure 2.1).
Figure 2.1Private funding sources for the major parties
Source: Grattan Institute, Submission 367, p. 3.
2.113The Grattan Institute added that the current federal donation laws make it difficult to distinguish small donations, donation splitting or income from fundraising dinners and business forums:
While some of the undisclosed funds no doubt came from ‘mum and dad’ donors contributing $100 to their preferred party, some is almost certainly the result of donations splitting, where people or organisations make multiple donations below the threshold (potentially deliberately to avoid being identified). The ‘other receipts’ bucket is also likely to contain significant income from fundraising dinners and business forums – where attendees pay thousands for an opportunity to ‘bend the ear’ of elected representatives. But again, disclosure laws make this sort of income impossible to distinguish from other benign income sources (such as investment income).
2.114Transparency International Australia (TIA) posited that there were loopholes in the current disclosure requirements, particularly for fundraising events:
Disclosure is also needed for income beyond clearly identified “donations”, such as expensive tickets to fundraising events. Currently there are no federal requirements to disclose the source of around two-thirds of the income of the major parties, including more than $100 million in income from hidden sources in the 2019 election. Not only does the federal threshold need to be lowered, and greater consistency across Australia achieved, but these loopholes against disclosure need to be closed.
2.115Curtin Independent agreed with the TIA’s view that there were loopholes in the federal disclosure laws, and suggested that ‘there should be a prohibition on activities that seek to avoid disclosure such as raising moneys through party memberships and dinner tickets and accepting donations via state level party branches where laws may vary.’
2.116Professor Williams held the view of taking a holistic approach when disclosing sources of funding adding that as ‘soon as you start exempting significant amounts, you open room for distortion.’
2.117The HRLC called for the regulation of ‘any form of income that could reasonably lead to access or an expectation of access with a politician.’ They suggested that the Electoral Act narrowly defines the term ‘gift’, elaborating:
Currently, the term “gift” in s. 287 of the Electoral Act is narrowly defined and excludes contributions for access to politicians, like: (a) fundraising tickets to events for the purpose of meeting politicians; (b) membership subscriptions to political parties’ business forums. This narrow definition means corporations and powerful industry peaks do not have to disclose their contributions, which can run into the hundreds of thousands. On the political party side, these contributions are labelled “other receipts” instead of “gifts”, meaning they are almost impossible to scrutinise.
2.118Professor Beck highlighted two jurisdictions that have expanded definitions of gift in their political donation laws, Queensland and New South Wales, and submitted both as a possible alternative to the current federal definition:
Queensland provides a model for fixing this problem. Queensland has expanded the definition of ‘gift’ in its political donations law beyond just donations to also include ‘fundraising contributions’ (defined in Electoral Act 1992 (Qld) s 200) and ‘sponsorship arrangements’ (defined in Electoral Act 1992 (Qld) s 200A).
Similarly, New South Wales has defined ‘gift’ in its political donations law to include ‘a contribution, entry fee or other payment to entitle that or any other person to participate in or otherwise obtain any benefit from a fundraising venture or function’ (which parallels Queensland’s ‘fundraising contribution’ definition) and any ‘annual or other subscription’ for affiliation with or membership of a party (see Electoral Funding Act 2018 (NSW) s 5).
2.119Professor Beck recommended that the Electoral Actshould be amended to expand the definition of ‘gift’ to include: fundraising contributions, sponsorship arrangements, membership or affiliation fees for the party or party-affiliated committees and forums.
2.120Rather than amending the definition for gift in the Electoral Act, the Grattan Institute suggested establishing meaningful categories for donation information disclosure:
Contributions above the disclosure threshold should also be itemised into meaningful categories. Income from fundraising events should be categorised separately from ‘other receipts’ – ideally as a ‘donation’ given that fundraising is often the explicit purpose of these functions. Loans should also be separated from ‘other receipts’, and the terms and conditions of the loan should be reported.
2.121The Australian Greens were also supportive of ‘ensuring that memberships, in kind gifts, investments, and fundraising dinners are covered by disclosure obligations’.
2.122The ACF were prescriptive in the additional disclosure classifications they believed were required to create greater transparency:
The ‘other receipt’ category should be broken down into clearly identifiable categories, including loans, investments, rental income, and party transfers. Any additional income not falling into one of the above categories should be classified as ‘other’ with the nature of the amount required to be disclosed on the return. A model for how this could be done has been previously presented in Senator Jacqui Lambie’s Commonwealth Electoral Amendment (Donation Reform and Other Measures) Bill 2020.
2.123Senator Pocock suggested that the Australian Law Reform Commission be tasked with reviewing the classification of gifts and recommending reforms:
To ensure greater disclosure, and greater transparency, the classification of types of gifts received by political parties must also be reviewed. For example, the current category of ‘other receipts’ is overly broad, opaque and open to abuse. … As Anthony Whealy QC, the Chair of the Centre for Public Integrity notes, ‘The federal disclosure scheme is misnamed — it is a non-disclosure scheme with more than a third of political funding shrouded in secrecy.’ I support all measures that would require the full disclosure of all receipts above the threshold, regardless of how they are classified and strongly support the tasking of a non-partisan body, such as the Australian Law Reform Commission, to develop recommendations for reforming the classification of gifts received by political parties.
2.124The Australia Institute advocated for a balanced approach to disclosure, to only disclose what could be considered as not posing as a conflict of interest or influence political decisions:
… the problem is that we don't know to what extent those undisclosed sums of money represent the benign or the less benign. As a principle we should expect enough disclosure that we know that anything not disclosed is not a problem; we don't need the rest to be disclosed. Some more information about just what other receipts represent would help there, even something like dividends, where the company involved has nothing to do with how that money is distributed versus, as you said, there might even be two different raffles with different qualities in terms of influence. I think if we had a lower threshold, closed some of the loopholes around multiple payments and brought in some of the rules against avoidance then that might go some way to clearing up what the rest of the dark money pool actually represents…
2.125Dr Lewis advocated for limiting the amount of money candidates can spend on their election campaign with the funds they receive from donations:
There also needs to be a ceiling placed on the amount of money individual candidates can spend on their election campaign. The ceiling should cover all forms of donations including in-kind donations and fundraising dinners involving ministers, shadow ministers, and other senior members of a political party (parliamentary and administrative).
2.126When questioned on whether a fundraising dinner would be classified as a donation under the current legislation, the AEC noted that while the Electoral Act contains a definition of gift it is difficult to assess whether this activity would be considered a donation.
Unintended consequences for third parties
2.127As noted in evidence above, some submitters expressed concerns that amending the electoral laws to improve transparency around money, including donations and disclosure, would have unintended consequences, particularly for charities and not-for-profits.
2.128The HRLC considered real-time disclosure as ‘a huge barrier to charities engaging in political advocacy’, adding:
The reason is that the definitions of electoral expenditure and electoral matter under the Commonwealth Electoral Act are incredibly complicated, and charities frequently need to go out and get legal advice in terms of whether or not they need to disclose under those provisions. If they have to do that in real-time and if they have to pay for legal advice in real time, the outcome will absolutely be that charities will self-silence. We're already seeing that under this regulation, and in the context where third parties don't pose the same corruption risks as political parties and candidates.
2.129The HRLC also suggested donation caps should not apply to third parties:
Donation caps should not apply to third parties or significant third parties. As only charities and not-for-profits rely on donations, many would be prevented from doing important advocacy while corporations and industry groups would be able to continue drawing on other income.
2.130The HRLC elaborated that introducing donation caps could potentially overly burden third parties, suggesting:
A reason for this is that third parties that receive donations are community groups, not-for-profits and charities; not big industry associations and corporations. Introducing donation caps entails a big discriminatory impact on some third parties, particularly community voices and a lot of charities—charities are already, by law, prohibited from supporting or opposing political parties.
2.131The Centre stated that it did not want to place ‘an undue burden on these small community groups’, and that ‘the health of our democracy depends on their donations and their electoral expenditure.’ They recommended that:
… a cap on third-party electoral expenditure, and a requirement to register with the Australian Electoral Commission when a third party intends to exceed, or has already exceeded, such an amount. The registration threshold should be sufficiently high to encourage participation by smaller organisations and civil society without being an undue administrative burden.
2.132The ACNC stated that while it ‘generally prefers transparency and acknowledges that there may be genuine public interest in charities incurring electoral expenditure below the current disclosure threshold’ it may ‘create an additional reporting burden for some charities’.
2.133The Hands Off Our Charities Alliance commented that not only would it potentially create an administrative burden, it would also ‘discourage many people from donating to their favourite charities.’ They suggested that a slightly higher threshold would be a better balance between encouraging one-off or casual donations while also promoting transparency:
Charities are far more likely to have a closer relationship with donors of $2,500 or more, and donors are likely to be more open to having their details published. This modest increase to the threshold would go a significant way to alleviating the administrative burden on charities and not-for-profits without compromising political integrity.
2.134The ACF highlighted that changes to the significant third party provisions under the Electoral Act had negatively impacted charitable organisations:
We calculate that, since coming into law, it has cost our organisation over $50,000 to comply with the changes, and that there will be a substantial continued cost to compliance. This cost has been calculated by adding up the staff time that we have needed to redirect from other services and activities to ensure compliance with the laws.
2.135The ACF elaborated that the significant third party provisions added to red tape:
There is no public interest benefit in applying the significant third party provisions to charities. The changes to the significant third party provisions have come at a significant cost to ACF, and it is difficult to see what, if any, public interest benefit the application of these laws on charities brings. Charities are already heavily regulated and must act in furtherance of their charitable purpose. They are explicitly forbidden from a primary purpose of supporting a political party or candidate for office. As a charity, ACF already reports publicly on our income sources. The significant third party provisions do not actually add any additional transparency, however instead, just tie charities like ACF up in red tape.
2.136The ACF called for an assurance that ‘all electoral law reforms which could impact the charitable sector are the subject of extensive and detailed consultation with the sector prior to introduction.’
The case for expenditure caps
2.137There is evidence that the significant rise during the spending of elections is leading to an arms race, where whoever has the deepest pockets wins. The Centre estimated that between the 1998 and 2019 elections the Labor Party and Coalition increased spending from over $110 million to $190 million. The expenditure by a relatively new political party, the United Australia Party, was around $123 million during the 2021-22 financial year.
2.138Professor Tham outlined that election spending caps and donation reform are both necessary because ‘big money in politics basically has that undue influence at two different stages’.
The spending cap deals with what the High Court has characterised as war chest corruption, whereby huge amounts of money can allow the distortion of electoral outcomes.
Caps on political donations mitigate the influence of big money in terms of the policy process, in terms of paid lobbying et cetera.
2.139Professor Williams warned there is a twofold risk if ‘reform of donations, campaign spending and funding is not pursued’:
1Money will impact upon the integrity of the electoral process by distorting process, and engendering soft corruption, whereby money will be given in return for access, potential policy outcomes and the like.
2Threatening public confidence. If this is not addressed, public trust in the electoral system and in parliament would be eroded.
2.140According to Professor Luke Beck, there are ‘two key benefits’ to a system which features expenditure caps: it levels the playing field; and acts as an enhancement of those other political fundraising integrity measures.
2.141Apart from restrictions on foreign donors, the Australian Labor Party noted current Australian laws do not regulate, restrict, or cap donations and expenditure on federal elections, to the detriment of fair elections.
Over the last decade, this approach has allowed extremely high-net-worth individuals, groups, and networks to distort the political conversation with levels of advertising that were previously inconceivable in Australian elections.
As result our elections are not fought on a level playing field. Expenditure from some actors crowds out all others.
Further, the pestilential quality of some of these campaigns is eroding trust and confidence in our elections and in the democratic system.
2.142As a result the Australian Labor Party supports the ‘introduction of caps on electoral expenditure to address this problem’:
JSCEM will need to carefully consider the design of a new system, including whether limits on expenditure should be complemented by caps on donations, expenditure caps for third parties, or expenditure reporting (as they are in electoral law in several States and Territories).
2.143The Nationals were welcoming of discussions that see reforms to the funding of political parties, however, are ‘not supportive of the introduction of spending caps’.
2.144The Liberal Party cautioned against the introduction of caps on electoral expenditure in federal elections:
The Labor Party did not take a detailed proposal to the election on imposing caps on electoral expenditure, and arguably does not have a mandate to implement such a change.
2.145The Liberal Party also highlighted that caps on donations in the ‘United States have thus far been unsuccessful at reducing overall election expenditure, with the 2020 U.S. presidential election being the most expensive election in human history’:
The result of limitations on campaign donations has been to encourage the creation of new entities, such as ‘Super PACs’, which are held to lower transparency and integrity standards than political parties, undermining the purpose of campaign finance restrictions.
2.146The Liberal Party argued that consideration of expenditure caps would raise many questions, including:
- Would caps apply to all expenditure by political parties, or just campaign-related expenditure?
- Would caps apply throughout the term, or just during a campaign period?
- At what level would caps be set?
- Would different caps apply in relation to federal, state, and electorate-level expenditure?
- Would a separate cap apply to House of Representative and Senate campaigns?
- How would arrangements differ between general elections and by-elections?
- How would third party expenditure be regulated and capped?
- The Liberal Party submitted it strongly believes that any changes must ensure that there is a level playing field for political participants:
The experience in other Australian jurisdictions has shown that while expenditure caps may limit campaign spending of the major parties, multiple trade unions will spend to the maximum amount allowed under a cap – delivering a massively unfair outcome in favour of the Labor Party.
Any attempt by the Government to restrict campaign expenditure by parties but not for third party campaigners (including unions affiliated with the ALP) should be seen for what it is – an attempt to rig the system in Labor’s favour.
2.148The Australian Greens highlighted that many European countries, the United Kingdom, Canada and New Zealand all cap election spending.
2.149The Australian Greens stressed spending caps should be designed to:
- apply to political parties, candidates, associated entities, and third parties
- impose electorate, State and national spending limits
- include expenditure on designing, printing, distributing, broadcasting and publishing campaign material (including driving a candidate-branded vehicle), polling and research, T-shirts and campaign merchandise
- operate from 12 months prior to the election date (noting that this would be facilitated by fixed term elections – see below), or two years from the previous election day
- set a limit that allows reasonable engagement by all candidates, taking account of the benefits of incumbency (see below), the cost of advertising in different electorates, and recognises the full range of campaign expenditure and in-kind contributions.
- The Australian Greens support placing caps on election spending and increasing public funding to ‘remove the need for candidates to go cap in hand for campaign funds to those who could later expect the favour to be returned’:
We need to level the playing field and make elections a contest of big ideas, not big bank balances.
2.151The Australian Greens stated their desire to remove the influence of money in elections, explaining that:
I think Australians more generally are pretty sick of the amount of advertising that goes on. I'm sure all of us can speak to our experiences with advertising and what that does as far as getting a message across. We know that there's a conservative estimate of around $500 million being spent at the last federal election.
2.152The Australian Greens also raised concerns about the influence the amount of money (such as that spent by the United Australia Party) has on politics by drowning out messages of policies that would otherwise get through to the public:
… in a sense that people just switch off. That's not healthy for democracy or for the democratic process.
The Greens are supportive of placing election caps, and as far as public funding for administration is concerned, we're fully supportive of further funding being provided to parties for their administration. We know that the executive provides grants for things like systems and system security, so in many ways this could be reflective of that model.
2.153Professor Williams highlighted that large amounts of money well deployed through advertising can ‘obviously affect how people vote, and, of course, that's the reason that people seek the money in the first place’:
But where you have extreme amounts in some areas and not a level playing field, that can lead to distorting outcomes that mean preferences aren't actually a true representation of how people would normally cast their votes. You see it in the US all the time. Money speaks, and if you want a system where, essentially, those who raised the most money are the most likely to be successful, well, that's the system that you could have, but it's problematic.
2.154The other distortion of the process Professor Williams raised was the ‘temptation or likelihood that people who receive large donations will tailor their policies in running for office in order to favour those people who are giving them large donations…’:
… and do so knowing that, even though it's not entirely popular, they might get the money they need nonetheless to convince the community and win the contest.
2.155The Centre stressed the associated risk if the Commonwealth maintains no caps on electoral expenditure:
In the absence of caps, public funding may serve to accelerate the ‘arms race’ of electoral expenditure. Public funding does nothing to prevent this, and parties may continue with their previous activities - just with more resources available.
2.156Professor Joo-Cheong Tham argued that the principles and the processes for determining the level of any expenditure cap was more important than the specific amount. Professor Tham suggested three principles:
1having the level of the cap apply to parties based on the number of candidates that they're fielding—this is an aspect found in the QLD, NSW scheme, the UK scheme and so on and so forth.
2the level playing field or the fairness rationale, and
3an anticorruption rationale because the demand for spending drives the supply of funds.
2.157Professor Tham advocates for a process of expanding these principles, and then subject to regular periodic independent review. He believed these independent reviews could be managed by the AEC, testing whether the level that's been set is suitable in terms of giving effect to these principles.
2.158The HRLC stated ‘the key to regulating corporate influence in politics is through spending caps’.
Capped expenditure period
2.159The Centre would welcome a capped expenditure period but it would need to be monitored.
As the Commonwealth doesn't have statutory election cycles, the applicable cap should happen two years after the previous polling day. That would give, roughly, 12 months of a capped expenditure period. The expenditure should be capped for the two years before. But if, for example, parties seek to start spending outside the capped expenditure period, that is something that may have to be considered.
2.160In relation to what sort of election expenditures should be included in the cap, Professor Luke Beck declared the ramifications of limiting advertising may allow a candidate with an ‘enormous war chest’ to spend ten times more on their market research or marketing. Professor Beck claimed it may not be a level playing field whatever cap is set on television advertising for example:
You may want to cap that at particular amounts or at a particular kind of expenditure—a more complete cap on anything to do with the election—but you have to define that.
You also need disclosure of what you spend so that all of that can be seen. … Disclosure of revenue or fundraising and disclosure of political expenditure in those categories … how much money was spent on television advertising, how much money was spent on consulting firms, how much money was spent on marketing and focus groups et cetera. It's a combination of mechanisms. There's no one silver bullet that improves integrity, that creates a level playing field.
Associated entities and third parties
2.161A number of submissions highlighted that the role of associated entities and third parties will have to be considered as part of any expenditure cap applied in the Australian system. While acknowledging the complexity of this particular issue, there was general agreement amongst a wide range of submitters, including most of the major parties in Australia, that omitting associated entities and third parties from expenditure caps would be to incompletely address the problem.
2.162The Liberal Party submitted if the Committee wished to investigate caps on expenditure, it ‘must also consider how registered associated entities are treated as part of any cap on either candidates or political parties’.
2.163The NSW Nationals argued that:
any reforms to campaign finance need to be applied equally to all participants, to all political actors. This includes parties, Independent candidates, unions, significant third parties and even Australia's version of a super PAC—the Climate 200 body, which we saw in the recent election.
2.164The Australian Greens stressed spending caps should be designed to apply to political parties, candidates, associated entities, and third parties.
2.165The Centre believed most of the states’ models on expenditure caps had suitable protections to deal with parties trying to circumvent expenditure caps by supporting third parties to run an issues campaign that's not captured by the cap:
Most of the comparable expenditure caps regimes around Australia include what we would consider to be an anticircumvention offence in which it is an offence to act in concert with a political party or someone with an agenda to essentially circumvent your applicable expenditure cap.
2.166The Centre’s submission also recommended that associated entities' spending should be added onto a political party’s spending and they should ‘come, essentially, under the same cap’:
… but we believe that the current Commonwealth definition of 'associated entity' should be narrowed to entities that exist solely for the benefit of the relevant political party. But we understand that with caps come potential workarounds. We believe the anticircumvention offence would protect it from that.
2.167The DAA argued that third parties should be covered by caps on donations and campaign expenditure:
… there’s evidence now from state jurisdictions, particularly in New South Wales, which could be drawn on in thinking about how to deal with third parties at the federal level.
2.168The HRLC has consulted with a range of stakeholders on whether third parties should be regulated within a reformed system, and argued that:
There are many different types of third parties. Third parties should be captured, as spending caps are the only equitable way of really regulating third parties in the same way.
2.169Professor Williams believed managing the expenditure of registered third parties in Queensland campaigns was a ‘really major issue with the Queensland legislation’.
There was very large pushback from charities and others for the good reason that they were caught within the net—and I think they were rightly caught within the net. Unless we actually have a holistic regime, people will set up the equals, whether they be charities, third parties or the like. We need to make sure that they are equally covered with appropriate caps, disclosure and the like. Otherwise, we'll just end up with the electoral fundraising and the fight moving from parties to third parties.
2.170Professor Williams considered any advantage that a range of unions may enjoy in Queensland in a so-called ‘financial gerrymander’ would also apply to other third parties.
You can make the same point about a variety of other third parties as well. Unions are a good example, and, given their historical connection to one side of politics, they're one area you could rightly focus on. Equally, you can point to some charities, corporations and the like. New South Wales sought to deal with this by reducing the caps, and third parties ran into problems in the High Court as a result. I think this is one of the hardest areas when it comes to design.
Incumbent advantage? Levelling the playing field
2.171The Australian Greens support reforms that level the playing fields for independent candidates standing against incumbents:
It is simply unaffordable for many independent candidates to be competitive, particularly against a well-known incumbent, without a significant benefactor – benevolent or otherwise. The need for resources also diverts candidates’ energies from listening to their communities on policy issues to endless fundraising activities.
2.172Climate 200 advocated for ‘funding and support in order to level the playing field in a system that advantages parties and incumbents.’ They posited that in ‘jurisdictions where electoral expenditure caps have been implemented … the difference in the cap allows for the parties to spend more on broad-based advertising like TV and radio, while an independent is hindered from engaging electors through these avenues.’ They recommended that:
… electoral expenditure caps should be made significantly higher for new
entrants and independent candidates in line with the identified value of
the full suite of advantages enjoyed by major parties and incumbents.
2.173The Grattan Institute held the view that amending electoral laws, particularly on electoral expenditure, would reduce the imbalance between established and newer parties:
Expenditure caps would reduce the ‘spending gulf’ between the
major incumbent parties and new and smaller parties, as well as
between well and poorly resourced third parties. There will always
be substantial differences in the resources and capacity of
political parties and interest groups to advertise their message,
but a cap set at a reasonable level would place a ceiling on the
2.174Dr Monique Ryan MP outlined a number of potential advantages incumbents have, including:
- party funding received from the AEC for votes received in the previous election
- use of (publicly funded) electorate office communications budgets; tax deductibility status throughout the political cycle — while independents receive this only after the official declaration of nominations, 2-3 weeks before the actual election
- public funding advances received by parties before the election, while independents receive no public funding until after the election.
- Dr Ryan MP suggested exempting new candidates from ‘donation caps until they reach a certain threshold of fundraising’ and ‘limit on spending for all candidates, with that funding provided by the AEC/state electoral organisation’ with strict enforcement.
- Charities and community groups that provided the joint submission to the #OurDemocracy campaign suggested a possible way to reduce incumbent advantage:
… the election spending cap needs to be sufficient to allow a non-incumbent candidate to spend enough to achieve broad name recognition in their electorate. For the same reason, the Committee should consider allowing a higher spending cap for independents and small parties, which will typically never benefit from such coverage, nor from the significant levels of public funding given to the established parties.
2.177Without reforms, the Australian Greens submitted there was a risk to Australia’s federal electoral system becoming even ‘more skewed towards the wealthy and entrenching the two-party system’.
A healthy democracy is not one in which those with the deepest pockets get to be the loudest voices. It is not one which discourages people without connections to wealthy donors from running.
2.178The HRLC agreed that the current system disproportionally favours wealthy candidates. The Australia Institute noted that a ‘challenger must spend considerably more than the incumbent just to ‘catch up’ to the incumbent’s publicly-funded benefits.’
2.179The ACF believed that establishing ‘spending caps should aim to improve current levels of political equality’ and:
Account for the benefits of incumbents and party backed candidates such as the additional staffing, printing, and advertising resources available to these candidates. A higher spending cap for independents and small parties should be considered to counterbalance this inherent advantage.
2.180The Centre highlighted the potential danger of public funding often rewarding incumbents more than challengers:
All of Australia’s public funding regimes reward previous electoral success, whether in the form of reimbursing electoral expenditure according to first preference votes or providing funds for incumbent members’ administrative expenses. Both measures arguably serve to entrench incumbents and exacerbate their already heightened advantage.
Views on expenditure caps in other jurisdictions
2.181Expenditure caps already exist in several Australian jurisdictions. Professor Luke Beck suggests that the High Court has found that expenditure caps are constitutionally valid, and noted that the main questions remaining relate to the level of the cap, which would require:
detailed analysis about the actual cost of political campaigns in recent times, comparing that with state levels et cetera to come to a fair and reasonable number. But that is absolutely possible. There are examples at state level that demonstrate mechanisms for how you calculate that initial cap and then questions about raising it in line with inflation, and so on.
2.182Professor Beck said legislation addressing expenditure caps would have to be ‘nuanced and multilayered’ to capture the expenditure that is spent for a seat-based campaign, as well as a political parties’ global, wider campaigns political party spends:
Further, there is a difference between a seat-based campaign in connection with a major or a minor party and a seat-based campaign for an independent who has no broader network or party. This is addressed a state level.
2.183The Liberal Party noted that where schemes to cap political expenditure and impose ‘real-time’ disclosure have been introduced in other Australian jurisdictions, they have been ‘accompanied with administrative funding being provided to political parties to assist with the significantly increased compliance burden, significant technology upgrades, and additional staff required’.
Significant lead-in periods have also been put in place in other jurisdictions to give political parties the time to establish new reporting systems.
2.184While noting some challenges of adding an additional administrative burden, the NSW Nationals were supportive that consideration be given to implementing the New South Wales model at the federal level.
2.185The NSW Nationals hoped the administrative burden on all parties will be considered when looking at making reforms to donation guidelines and electoral expenditure caps.
In relation to level of support parties would require for the administrative burden of complying with the new obligations and level of public funding parties would be seeking to substitute for the removal of private donors bankrolling elections and campaigns.
2.186The NSW Nationals stated that this is dependent on the model that is proposed – a more prescriptive model would require more administrative costs. Further, because both federal and state parties are actors in federal election campaign, any funding model that is proposed needs to acknowledge that there are compliance obligations on both entities.
2.187The Australian Labor Party stressed it did not agree with the premise that ‘advocacy around additional administrative support for political parties in order to comply with a lower disclosure threshold or the introduction of real-time disclosure is in fact to offset a decline in revenue from other sources’.
2.188The AEC confirmed that it has received a formal briefing from the Electoral Commission of Queensland, ECQ, about the implementation of the IT system that managed the expenditure cap and the near real-time disclosure regime.
Public funding of elections
2.189A number of submitters advocated for an increase in the level of public funding given to political parties and eligible candidates to help reduce the influence of private money in elections.
2.190Noting that the reforms proposed will increase the compliance burden on political entities, witnesses also called for the introduction of additional administrative funding to support routine party expenses, as occurs in a number of states already.
Table 2.1What do the states do on public funding?
Per vote public funding
Public funding vote threshold
Public funding capped to expenditure
Administrative funding (max)
Other public funding sources
Source: Parliamentary Library, Research Paper Series, 2022-23, Election funding and disclosure in Australian jurisdictions: a quick guide, 6 December 2022.
2.191A key point made by witnesses is that Australia’s current system of public financing for election funding of parties and candidates is not fit for purpose.
2.192The Centre has recommended that specific action be taken with regard to funding, to address these issues with the ‘dollar per vote’ model, based on principles to improve equality. However, they cautioned that public funding is also fraught with risks:
- it may serve to fuel excessive electoral expenditure, sap the internal vitality of parties, and entrench incumbents
- depress the supply and demand of these contributions as parties become more state dependent.
- Increasing public funding, as some witnesses noted, makes sense as part of wider changes including those discussed earlier in this chapter:
A higher public funding rate is essentially a trade-off to secure changes elsewhere, a higher public election reimbursement rate is an attractive trade for lower expenditure caps, and a higher public election discretionary funding rate would offset the increased administrative load on parties.
2.194Similarly, Professor Joo-Cheong Tham noted that increasing public funding would allow parties and candidates to ensure proper compliance with electoral laws:
I think when it comes to financial affairs there needs to be a high-level professionalisation, given the money involved and so on and so forth, to free up the volunteers from the compliance activity and to focus, if you like, on the policy and campaigning activity. That's one aspect of public funding to support political parties and key democratic institutions.
2.195While Dr Colleen Lewis acknowledged that the taxpayer is going to have to be ‘convinced’ of the benefit in giving more of their money to run political campaigns, and that, in the context of the existing trust deficit in politics, ‘that's going to be a very difficult argument to win’, there are strong arguments to be made in favour of increased public funding:
… there are many experts who support an increase in political funding, with other conditions, and such experts could assist in using their expertise in this area ‘to mount the argument to the Australian people on why it could well be in the public interest to have a modest increase to political parties.
2.196A further benefit was identified by Professor Tham, who argued that public funding might lead to increased public membership of and participation in political parties, and for parties to manage their memberships:
Further, is to use public funding as a lever for encouraging membership; public funding system that is also based on the number of members a political party has. There's an incentive for political parties to get members but also recognising that membership requires costs in terms of maintenance, calling meetings and so on and so forth.
2.197Professor Williams made a similar point, recommending:
… a modest increase in public funding to political parties, subject to those parties meeting minimum standards of accountability, including by way of incorporation and internal standards as to member participation and independent dispute resolution.
2.198The Australian Greens recommended introducing a new system of public funding for election campaigns and the administration of political parties.
The public interest in removing the influence of donors in election outcomes justifies an investment of public funds in ensuring campaigns can promote candidates and allow voters to understand their options.
… Funding should be set at a level that reduces corporate influence on political decisions, while ensuring political parties and independent candidates are able to participate effectively in the democratic process.
2.199The Nationals argued that the fairest option would be to introduce a system where a ‘payment for party administration was paid based on parliamentary representation in the House of Representatives and the Senate, potentially based on an average representation over a three term period which has been previously proposed’:
Party administration funding is critical for smaller political parties who still incur the same fixed costs and overheads as larger parties (e.g. rent, salaries, utilities), but do not have the same capacity to generate income flows.
2.200The Nationals suggested other measures which could be considered:
- An administration funding limit for the major political parties.
- A provision should be considered to deal with possibility of separate House of Representatives and Senate elections where say, double the general public funding would be paid for a House of Representatives only election, although at the eventual half Senate election potentially only the normal amount would be paid.
- Any federal public funding model should recognise that both federal and state political parties / branches / divisions are participants in federal elections.
- Strengthening third party compliance and reporting requirements.
- Indexing all payments annually at CPI.
- The Centre noted that Australia’s ‘public funding also does little to promote political equality in a meaningful way’:
While all parties and candidates can formally access public funds, the ex-post reality of the payments creates a vicious cycle which entrenches incumbents. As funding is calculated based on past electoral support, it is to be expected that ‘established parties are very likely to enjoy a financial advantage over newer parties’.
2.202As well as arguing for additional public support, Professor Beck touched on providing appropriate resourcing so the AEC can develop systems to make reporting easier, more seamless and intuitive:
It's important that there's appropriate funding for that kind of resourcing development at the AEC level to make sure that their online reporting and accounting forms are really high quality. … That probably also goes for disclosure of political donations and, I hope, disclosure of political revenue more broadly, to make it easier to comply. You can have principles and rules and you can make them easier or harder to comply with based on the bureaucratic paperwork that has to go on.
2.203Professor Beck noted that integrity carries with it compliance costs: ‘that needs to be factored into this decision-making, but those compliance costs should not be seen as a reason to not proceed.’ Submitters noted that administrative support had also been provided in states and territories where real-time disclosure regimes had been introduced.
2.204The DAA added:
… some administrative funding is quite justifiable, as is done at the state level in New South Wales and Victoria. But you have to be terribly careful that you don't increase incumbency advantage and that you do make provision for parties that don't have elected members. That is being done on a very small scale at the state level, but it has to be thought about quite hard.
2.205The HRLC was a strong advocate for more funding and for people to get the funding they need to comply with the administrative burden and agreed with Professor Marian Sawer of the DAA that ‘… it's not at the level that further distorts in favour of incumbency.’
2.206The HRLC called on the Committee to consider any possible administrative burden posed by amending legislation:
… that the folks who find it hardest to comply with these laws, and actually have to interpret some of the hardest definitions in the laws, won't get public funding, and they are the third parties. It's another reminder of the committee thinking about the administrative burden of these laws. Again, be very mindful of how we capture third parties.
2.207The Public Health Association (PHA) supported an increase in public funding:
The public funding of elections and political parties could be increased, for example, to allow for operational costs, engaging members, promoting policy positions and running election campaigns.
An increase to public funding, paired with electoral expenditure caps would level the playing field in Australian elections and provide adequate resources for all candidates, including new candidates and political parties, to promote their policy platforms.
2.208The ART believed one way to handle the issues would be if ‘all donations went through a public body’:
This would be a way of actually recording all the donations and where they went to. Donations couldn't be made other than through that body. That addresses the administration issues.
The Accountability Round Table haven't gone so far as advocating it but it's something to consider. It might be cheaper than paying for the parties to do the administration, and you might trust it more.
2.209Professor Tham agreed there should be greater resourcing for political parties to assist them in operating under a disclosure regime to meet these compliance requirements:
That's clear in terms of the New South Wales reforms, where there were increases in public funding. One of the central reasons for that was to ensure there were enough staffing resources in terms of compliance. … if there's going to be increased regulation, there's of course going to be increased compliance activity. We should be conscious that this regulation doesn't amount to an informal entry barrier to smaller parties or newcomers. The resourcing of those smaller parties and newcomers, whether directly through public funding or through the Electoral Commission, to basically enable them to comply is an important aspect in terms of putting forward this reform in an effective and equitable way.
2.210Professor Luke Beck agreed with Professor Tham that ‘… integrity is important, and integrity carries with it compliance costs’:
That needs to be factored into this decision-making, but those compliance costs should not be seen as a reason to not proceed. Politics at state level—in those states where these regimes exist—functions perfectly healthily. The time for looking for excuses to delay at a federal level really needs to come to an end.
2.211The Centre supported the New South Wales New Parties Fund as a potential model federally:
We recognise that there is a requirement and, indeed, a need to be able to support the administrative burden on small parties, particularly … given they don't have great compliance infrastructure.
Possible avenues for circumvention need to be addressed
2.212As noted earlier, any reforms would need to accompanied by consideration of what anti-circumvention measures might be needed, to ensure compliance and that transparency is improved and not avoided.
Campaigns with a corporate financial structure
2.213The DAA warned of the challenges related to candidates with corporate structures operating their finances, and how a scheme would be created to ensure that those corporate structures provide the same levels of transparency on donations and disclosures. They believed it is important to have regulatory neutrality when it comes to caps, especially on actors:
The definition, generally, in these laws is neutral. It's not just about whether your organisation's a political party; that is, usually, an unincorporated association, traditionally. Those definitions make a difference when it comes to disclosure, sometimes, and we have to be careful about that. But when it comes to expenditure, the question is: would the Electoral Commission or a court decide that this was an electoral matter? That's much easier to do during a limited campaign period. It becomes much harder to operationalise that test, about what advocacy is an electoral matter, when you get further and further away from the silly season, so to speak.
2.214The DAA raised the example of organisations, like ‘Mr Palmer's, whether it's his company or his party, that were starting to campaign last September , to get a march on the other minor parties’:
It didn't buy him seats in parliament but it certainly bought him attention in the agenda and was unfair competition over the other, what I might call, right-wing minor parties. … We don't, in terms of expenditure caps, just focus on parties on candidates; we focus on the expression of organisations and individuals, for that matter. If you think about Mr Palmer, if you have donation limits, he can't self-inseminate his party but he can spend a lot of money by Mineralogy campaigning. And we don't want those kinds of waterbed effects by just regulating parties.
2.215Professor Tham outlined that corporate structures shouldn't be allowed to avoid disclosures:
… is that we want to have effective disclosure, including of funding to candidates, and that corporate structures shouldn't be allowed to be used to evade these disclosures. What I'm saying is that I'm not quite sure that this is a problem with the law itself, because the definition of a gift under the Commonwealth Electoral Act captures gifts made directly and indirectly to candidates.
2.216The HRLC believed donation caps would also limit ability of corporate structures to hide.
By corporate structure we're talking about the pooling, so it goes to another body and then from that body. If we had donation caps that structure would actually be very difficult … It depends now if Climate 200 ends up being an associated entity, but Climate 200 is not that different to associated entities, and the reason that category was introduced in the first place is that associated entities were being used then to deliberately wash money. The way to do that is to make sure that money coming into Climate 200, or any other donor body of that type, also has to disclose their income.
Additional reform proposals put to this inquiry
2.217The Committee acknowledges that inquiry participants proposed other areas where reforms could be made which they believed would increase transparency around political donation laws, including the regulation of lobbying and the tax deductibility status of donations.
Regulation of lobbying
2.218The Grattan Institute voiced concerns about lobbying, observing that ‘policy making can be distorted if some interests are consistently heard while others are not.’ They noted that both NSW and Queensland provide information on who meets with ministers, and the purposes of those meetings, but that ‘at the federal level, there is no information on who gets access to policy makers, how much lobbying takes place, or the policy issues involved.’
2.219They considered that the ‘checks and balances on lobbying activity in Australia are weak’ adding that:
… existing instruments such as registration of lobbyists and codes of conduct are ineffective because they apply selectively and are not enforced. There is barely any public information about contact between lobbyists and ofﬁcials at the federal level.’
2.220The Grattan Institute made two recommendations which they believed would improve transparency including:
- publish ministerial diaries to enable public scrutiny of who ministers are meeting – and not meeting – and encourage them to seek out a wider range of views.
- link the lobbyists register to ‘orange passes’ to identify commercial and in-house lobbyists with privileged behind-the-scenes access to Parliament House, and ensure they comply with the lobbying code of conduct.
- The PHA agreed that strong legislative regimes were necessary to govern corporate lobbying of elected and public sector officials.’ They agreed with the Grattan Institute’s recommendations noting that:
Lobbying and activities to access and influence public servants are a legitimate form of political activity. However, lobbying may cross bounds of democratic principles if it is done in secret, involves corruption or misconduct or if it involves unfair access or influence. Reforms proposed by the Human Rights Law Centre, such as a requirement for professional lobbyists to register and disclose meetings, the introduction of a cooling off period for ministers and their staff before entering some corporate roles and the introduction of a strong federal integrity commission, would help improve transparency.
2.222TIA concurred with the view that the regulation of lobbying activity at the federal level was weak. They recommended overhauling the lobbying regime and made several recommendations:
- legislated codes of conduct for all officials and persons seeking to influence public decisions involving financial, personal or political benefit (including but not limited to ‘lobbyists’), based on respect for positive principles of integrity.
- registration of all professional lobbyists (including third-party, services firms and in-house) to boost transparency, awareness and compliance.
- confidential, independent advice for all senior office holders on compliance
- administrative, disciplinary and criminal sanctions with independent oversight and enforcement.
- The Committee notes the concerns raised by inquiry participants about lobbyists’ access to decision makers.
Tax deductibility of donations
2.224Under the Tax Laws Amendment (Political Contributions and Gifts) Act 2010, individuals can claim a tax deduction of up to $1500 for donations to political parties or candidates. Witnesses suggested a range of reforms to this measure, from increasing the tax deductibility of political donations to further restricting it.
2.225FamilyVoice Australia recommended amending the legislation to enable businesses to claim tax deductions as well as increasing the amount able to be claimed:
Not only should tax deductibility be retained but given that the threshold has remained unchanged since 2006, the amount able to be claimed should be increased to take account of inflation. An increase to the rounded figure of $2,000 is sensible.
2.226Climate 200 and Dr Monique Ryan were of the view that major parties and incumbents had an advantage which made them less reliant on donations, including their tax deductibility status, throughout the political cycle. They recommended that ‘new entrants be given access to the electoral roll and tax deductibility of donations from when the candidate formally announces and meets reasonable eligibility criteria with the AEC.’
2.227The Electoral Reform Society of South Australia advocated for removing the tax deductibility status for all political donations, on the basis that it was ‘inequitable that the value of donations in terms of tax saved increases for those with higher taxable incomes.’
2.228It is time for the Government to reform the Commonwealth system of electoral expenditure and political donations. The Committee has given consideration on how to effectively regulate a political donation and expenditure scheme at the federal level, including donation and spending caps, and capturing third parties. This is based on the significant work already done in this area. These are not new issues, and they need to be addressed as soon as possible, preferably in advance of the next federal election.
2.229In reforming the system, the Government should take note of evidence that the best way to achieve reform is to consider the system as a whole. That is, reforms to donations, spending and other aspects of electoral finance should be considered and implemented together.
2.230Commonwealth electoral law reform now lags behind most states and territories. The Government should see this reform as an opportunity to build public trust in the system.
2.231Evidence from individuals and organisations to this inquiry demonstrates there is significant community support for increasing transparency around electoral donations through lowering the donation disclosure threshold and real time disclosure requirements.
2.232Likewise, evidence from individuals and organisations to this inquiry demonstrates there is significant community support for tackling the potentially corrupting influence of big money on elections through the introduction of both donation and spending caps.
2.233The Committee’s intention in this report is to provide a framework and objectives for a reformed system:
- to improve transparency;
- to reduce the potentially corrosive influence of big money;
- to level the playing field for new entrants;
- to ensure the integrity of, and compliance with, the system, and
- to allow continued participation in our elections from the public, civil society, business, political parties and others.
- The Committee notes the concerns raised about how reforms should apply to third parties. These concerns related to the administrative burden that may be placed on third parties, the different nature of the work performed by third parties, and for not-for-profits, their reliance on donations for that work, as well as the importance of third parties being able to continue to play an active role in elections.
- The Committee also heard evidence about the importance of including third parties in reforms to the electoral finance system (including to prevent them from being used as a vehicle to circumvent reforms).The Committee will continue to hear evidence regarding the application of proposed electoral reforms to third parties and other entities as part of our ongoing deliberations.
- Similarly, the Committee notes complexity around how associated entities are defined and included in an electoral expenditure system. Again, the principle should be that associated entities are included in reforms to the electoral finance system and that there is broadly a consistent approach taken across various forms of entities.
- For these reasons, further consultation may be necessary on the application of a reformed system to third parties and associated entities.
- The Committee also notes the AEC may, with greater resourcing, be able to play an important role in providing advice and support to third parties to ensure they are compliant with their obligations.
- The Committee notes evidence around how much of the current reporting system is opaque and considers reforms are more likely to be successful if reporting regimes are made more robust.
- There are likely to be associated costs with making significant changes to the funding and disclosure regime, for both participants in elections and for the AEC in administering elections.
- Given the need for legislation, and the time involved in ensuring that any changes can be clearly understood in the community, action should be taken now, including any necessary further consultation, and that any actions be reviewed following the next federal election.
Donation disclosure and coverage
2.242The Committee recommends that the Australian Government lower the donation disclosure threshold to $1,000.
2.243The weight of evidence supported lowering the disclosure threshold to $1,000. This amount was broadly reflected in the evidence in order to ensure a robust level of transparency, while not discouraging participation from members of the public in activities such as local raffles.
2.244It would also broadly align Commonwealth laws with Australia’s three most populous states, which should assist with compliance.
2.245The Committee recommends that the Australian Government introduce ‘real time’ disclosure requirements for donations to political parties and candidates.
2.246This will require additional administrative time and resources on the part of parties, candidates and other participants in elections. However, many submitters recognised these additional burdens were not difficult to achieve so long as support is provided, and that reducing the disclosure period represents an important development for improved transparency in this area.
2.247The Committee recommends that the Australian Government gives consideration to amending the definition of ‘gift’ in the Electoral Act to ensure it meets community expectations of transparency in political donations.
Donation and spending caps
2.248The Committee recommends that the Australian Government introduce donation caps for federal election donations.
2.249These should be based at a level that is consistent with objectives including:
- reducing the potential for big money to have undue influence on elections
- increasing transparency
- recognising the additional hurdles to entry faced by independents or new entrants, and
- maintaining the implied right of freedom of political communication, as well as participation in elections.
- They should also be based on evidence the Committee received, which may include having regard to the below features:
- applying to all parties, candidates, and associated entities (with further evidence to be considered regarding application to third parties)
- being set on a per annum basis
- being aggregated across candidates and parties, and
- providing for an appropriate exclusion for party membership fees, subscriptions, levies and affiliation fees.
2.251The Committee recommends that the Australian Government introduce expenditure (also known as spending) caps for federal elections.
2.252The expenditure caps should be based at a level that is consistent with the objectives set out above for donation caps.
2.253They should also be based on the evidence the Committee received, which may include having regard to the below features:
- being set per House electorate and Senate state or territory, while also being capped at a national level
- being higher for independent candidates, noting they generally have less existing structural support than candidates endorsed by a national political party
- applying to associated entities and significant third parties in a proportionate way
- being structured in such a way to provide clarity about what constitutes electorate expenditure and support administrative compliance, and
- being set for a defined period of time, noting the uncertainty caused by there being no fixed date for elections.
2.254The Committee recommends that donation caps and expenditure caps apply to third parties and associated entities.
Integrity and compliance
2.255The Committee recommends the Australian Government introduce a requirement that all political parties, members of Parliament, candidates, associated entities and third parties be required to establish a Commonwealth Campaign Account for the purpose of federal elections, to better allow for disclosure and monitoring.
2.256The Committee recommends the Australian Government introduces a new system of administrative funding to recognise the increased compliance burden associated with a reformed system.
2.257The Committee recommends the Australian Government introduce a new system of increased public funding for parties and candidates, recognising the impact changes a reformed system will have on private funding in elections.
2.258The Committee recommends the Australian Government provide the Australian Electoral Commission with additional resources to support, implement and enforce these reforms.