Referral and conduct of the inquiry
On 5 February 2020, the House of Representatives Selection Committee referred the provisions of the Commonwealth Electoral Amendment (Lowering the Donation Disclosure Threshold) Bill 2019 (the Bill) to the Joint Standing Committee on Electoral Matters for inquiry and report.
Introduced in the House on 2 December 2019 by Ms Rebekha Sharkie MP, member for Mayo, the Bill amends the Commonwealth Electoral Act 1918 (the Act) to ‘lower the political donation disclosure threshold from $13,800 to $1,000, and to remove ongoing indexation of that disclosure threshold.’
In her speech on the Bill’s second reading, the member for Indi, Dr Helen Haines MP, elaborated on the intent of the Bill, stating:
Voters should not be blinded by the law to what candidates raise and what they spend. We need comprehensive, robust reform of the system of Federal political donations and disclosure.
Dr Haines MP highlighted that New South Wales, Victoria and Queensland have all set a $1,000 minimum political donation disclosure threshold.
The Committee advertised the inquiry on its website; issued a media release on 12 February 2020; and invited an array of stakeholders, groups and individuals to submit to the inquiry, including all registered political parties, relevant Federal and State and Territory government departments, peak bodies, and civil society groups and academics.
The Committee received 20 submissions from a range of organisations including advocacy groups, academics and concerned citizens.
The Committee thanks those individuals and organisations who contributed to the inquiry.
Purpose of the bill
The Bill consists of two clauses:
to amend the definition of disclosure threshold to $1,000; and
to remove ongoing indexation of that disclosure threshold.
Overview of the current disclosure threshold
Tabled on 17 December 2019, the Committee’s advisory report on the Commonwealth Electoral Amendment (Real Time Disclosure of Political Donations) Bill 2019 provided an overview of the current disclosure regime including the annual disclosure requirements and the penalties relating to funding and disclosure regulations.
The Committee’s report on the conduct of the 2016 Federal election and matters related thereto also provides an overview of past Electoral Matters Committee inquiries on political donations.
Reform proposals put to this inquiry
Submitters were divided on whether it was worthwhile lowering the donation disclosure threshold. Some submitters put forward the view that lowering the threshold would have unintended consequences, placing an additional administrative burden on minor parties, while others believed that the Bill did not go far enough, suggesting the disclosure of all political donations at any amount.
The submitters who supported the passage of the Bill believed that it would provide greater transparency and in so doing potentially lead to greater democratic accountability.
The Child Protection Party (CPP) stated that it had no objections to lowering the threshold or removing the ongoing indexation. They put forward the view that there were benefits to removing the ongoing indexation:
remove the need for the Australian Electoral Commission to notify political parties of the annual change to the reporting threshold.
remove any confusion from political parties about what the reporting threshold is year on year.
Associate Professor Luke Beck, Faculty of Law, Monash University, believed that the Bill was important in improving transparency in the political system by ‘preventing impropriety and improving public confidence in the political process.’
The Human Rights Law Centre (HRLC) commented that the Bill was a step in the right direction as there was an ‘urgent need for greater transparency around money in politics in Australia.’
The Australian Progressives supported the Bill stating that it was ‘an effective step in the path to removing the power of big donors in our political system, and transitioning to the eventual goal of full public funding of elections.’
They commented on the importance of educating the Australian public about political donations and whether that money is potentially influencing policy decisions:
It is essential that the people of Australia are fully informed about who is financing their political parties and representatives. Moreover, it is important to identify how these donations are potentially influencing public policy decisions that affect the day-to-day lives of all Australians.
The Australian Progressives supported the Bills intent to remove indexation and held the view that a threshold of $1,000 was adequate ‘as it respects the privacy of small donors to political parties, both minor and major.’
In a largely similar view as the Australian Progressives, Mr Benjamin Cronshaw put forward a perception that parties may feel obligated or influenced by individuals or organisations that make a significant donation:
Any amount close to $13,800 represents a considerable donation. Instinctively, a party would be more likely to listen to something making such a donation, compared to say, $990 or $50. There is concern that people with more money would have more influence, which could sway party policy away from the public good or expert advice. Giving money can give access or a sense of entitlement to dictate to parties what they should do. Parties may feel a sense of obligation, or at least a realisation that turning away from expected policies would lead to a loss of future donations.
Mr Cronshaw stated that the Bill could lead to greater transparency around political donations and ‘help to restore public confidence in the system, by taking [a]way the potential for interest groups to make large donations without any public knowledge.’
Sex Work Law Reform Victoria Inc. (SWLRV) supported the Bill adding that it would, if passed, potentially ‘lead to greater democratic accountability, which should begin to improve trust in our political institutions.’
GetUp commented that the Bill was a good first step and that it would harmonise disclosure thresholds across ‘Federal, State and Local Government elections.’
Mr Andrew Wilkie MP and Dr Colleen Lewis supported the Bill as well as calling for additional donation disclosure reform.
In line with the previous submitters, the Australian Greens and the Public Health Association of Australia (PHAA) supported the introduction of the Bill and advocated for increased electoral reform.
The Science Party Australia (SPA) supported lowering the donation disclosure threshold for political parties but did not support removing the ongoing indexation of the disclosure threshold stating:
We are unable to find the reasoning for proposing to remove indexation. No indexation method will be perfect forever, but small adjustments can be made if the indexed amount drifts too far from the original intention. Amounts like this are the sort of thing that should be subject to indexation, to avoid continued reliance on the parliament of the day to modernise legislation.
Professor Graeme Orr, University of Queensland Law School, believed that the existing disclosure threshold was high, ‘in a policy and practical sense’, and supported lowering the donation disclosure threshold in principle. Professor Orr, however, queried whether lowering the threshold to $1,000 was an ideal figure:
… $1,000 equates to a direct debit of just $20 per week to support a political cause. That is not beyond people on median incomes. On its own, it is not an amount likely to leverage influence or invite accountability scrutiny. But its disclosure (required by section 305B(1)) might deter a public servant or a small retailer from using such a modest sum to associate with a political cause.
Vote Australia did not believe that the $1,000 threshold went far enough and called for disclosure of all donations at any amount:
Vote Australia does not object to the lower threshold of $1,000 without indexation but would prefer to see the Bill require that all financial donations and donated professional services to candidates, politicians and political parties, regardless of value, be disclosed.
The Nationals, however, did not support any changes being made to the current disclosure requirements:
The current scheme gets the balance right in that all political parties are required to detail their revenue and expenditure and include the value of any liabilities and assets to the AEC along with information about any discretionary benefits the political party receives from the Commonwealth state or territory governments.
The Hon. Bob Katter MP also voiced his opposition to the Bill stating that it would disadvantage minor parties compared to the major parties.
The Liberal Party of Australia expressed their view that the current funding and financial disclosure regime should be maintained. They added:
The Liberal Party does not support changes to these arrangements that would unnecessarily add to the already considerable administrative and compliance burdens placed on political parties. The Liberal Party does not support changes which fail to recognise that political parties are broad-based organisations with large volunteer wings and limited resources.
Unintended consequences for third parties
As noted above, some submitters, however, stated their opposition to the Bill believing that it would have unintended consequences particularly for minor parties and independents.
The Shooters Fishers and Farmers Party (SFFP) stated that it would place an undue administrative burden on minor parties and donors. The SFFP believed that the current disclosure threshold did not ‘exert considerable influence in a Federal setting’ and conversely called for it to be increased.
Mr Katter posited that lowering the donation disclosure threshold would not increase transparency or change the way major parties receive donations but would rather have the following consequences:
lowering the threshold from $13,800 to $1,000 will impact the independents and minor parties who rely on donors for electoral funding.
legislating donations over $1,000 to be disclosed will ensure fewer donations.
lowering the threshold to $1,000 will only change the way smaller donations are made.
The Australian Greens also raised concerns that the ‘increased disclosure requirements will create an increased level of administration and associated costs for affected organisations’ and recommended that disclosure requirements be consistent across jurisdictions in each state/territory. They recommended that:
… consideration be given to mechanisms and support to ensure these additional requirements do not unfairly disadvantage smaller organisations and party branches. In particular, administrative difficulties would be lessened if donation disclosure requirements were standardised between all jurisdictions.
The HRLC highlighted a few possible unintended consequences for community groups, charities and third parties should the Bill be passed in its current form. They stated that the Bill would:
impose onerous compliance obligations on community groups and charities; and
impose a greater administrative burden on third party community groups and charities that rely on donations.
The HRLC stated that lowering the disclosure threshold would capture community groups and charities as ‘third parties’ under the Electoral Act and, as a consequence, they would have to comply with the Act’s reporting requirements:
Section 287 of the Commonwealth Electoral Act 1918 (Cth) (Act) defines “third party” as an entity which has incurred electoral expenditure in excess of the disclosure threshold (but is not a political campaigner). In lowering the disclosure threshold to $1,000, this Bill would lower the threshold at which community groups and charities become third parties and subject to the disclosure and reporting regime under the Act.
They believed that compliance with the reporting obligations were particularly difficult, adding:
Compliance with these disclosure and reporting obligations is difficult, particularly given the complex definition of “electoral matter” under s. 4AA. Even inadvertent non-compliance attracts a significant penalty of up to $12,600 (s. 314AEB). The combination of onerous administrative requirements and strict penalties for inadvertent errors is likely to discourage local, volunteer groups and charities from incurring even small spends on issues-based advocacy in the lead up to elections.
The HRLC believed that the Bill would not require greater transparency of corporate third parties ‘because they rely on membership fees, levies and other forms of income not captured by the definition of ‘gift’ in s. 287 of the Act.’
Professor Orr also highlighted that section 287 of the Act could encapsulate civil society groups as third parties and therefore make them responsible to adhere to the annual financial disclosure obligations. He recommended ‘lowering the threshold for disclosure of gifts from individual sources’ as ‘the Act should ensure a higher threshold of electoral expenditure before roping in third parties.’
The SPA also raised concerns that the Bill would place an additional administrative burden on smaller parties and donors:
The extra burden of completing an Election Donor Return would discourage medium donations over $1,000, which is unfortunate given that parliament in 2019 increased the nomination deposit for election candidates from $1,000 to $2,000.
As a possible way of reducing the administrative burden on donors, the SPA recommend keeping the obligations for donors at the prescribed threshold of $14,000.
The Nationals, in its submission, believed that a reduction in the disclosure threshold would significantly impact on the operation of smaller parties. They hypothesised that reducing the threshold would also reduce the number of donors:
The Bill proposes a reduction of the disclosure threshold by 93% and that inevitably would result in a reduction in the number of donors, and in the amounts which the donors presently giving up to $13,800 would be prepared to give. Because of the relationship between the disclosure provisions and the provision of public funding, that necessarily must have an impact on the extent of the public funding to be made available to political parties.
In its submission, the Australian Electoral Commission (AEC) highlighted that the Bill would have a financial and administrative impact on their processes:
From an administrative perspective, I note the Bill, or any changes to FAD [funding and disclosure] legislation, would likely necessitate a number of changes to the AEC's administrative process and systems which would have financial impacts on the AEC. In addition, any change to the disclosure threshold may also need further consideration of appropriate enforcement provisions.
The AEC noted that there are ‘four key principles that appeared to be common to most FAD schemes globally’: Transparency, Clarity, Timeliness, and Enforcement.
Suggested additional amendments
The HRLC recommended a number of amendments to the Bill including retaining indexation and the spending and disclosure threshold for third parties:
decouple the disclosure threshold from the spending threshold at which a person or entity becomes a third party;
maintain a spending threshold for becoming a third party of not less than $14,000 (indexed);
retain a disclosure threshold of $14,000 for third parties;
expand the definition of ‘gift’ in the Act to capture membership fees, levies and other forms of corporate income; and
modestly increase the disclosure threshold and retain indexation.
The Australian Greens advocated for increased electoral reform including the real-time disclosure of political donations and made a number of recommendations on how the Bill could be strengthened including:
clarification that the threshold applies to the cumulative total of donations given by a donor in a reporting period, to avoid the possibility that a donor will give a number of smaller donations to escape disclosure obligations;
membership subscriptions and attendance at fundraising events be included in the definition of ‘gifts’;
banning donations to political parties and candidates by all for‐profit developers, banks, mining companies and tobacco, liquor, gambling, defence and pharmaceutical organisations; and
capping all other donations to political parties and candidates to $3,000 per election cycle. Contributions from the same donor should be aggregated for the purpose of this cap.
GetUp suggested that the Bill be amended to include expenditure caps and ‘the membership fees of corporations to industry groups who campaign in elections.’
Mr Andrew Wilkie MP called for additional donation disclosure reform such as a cap on donations, real-time disclosure, and increased penalties for non-compliance:
I also believe there is a need for a sensible cap on donations by individuals, unions and corporations over a parliamentary term; real-time disclosure of donations; and tough penalties for non-compliance. There is also a need for the definition of ‘political donation’ to be expanded to include any expenditure or gift-in-kind that has the material effect of benefiting a political party or candidate.
Dr Colleen Lewis also advocated for additional donation disclosure reform similar to Mr Wilkie including:
real-time disclosure of political donations (within 24-48 hours after receipt of a donation;
introducing a cap on the expenditure allowed to be spent by any party/individual when campaigning in an election; and
introducing truth in political advertising laws.
The SPA was in favour of shorter disclosure periods for donations stating:
The SPA supports short disclosure periods of, say, five business days for reportable donations. Such legislation should be carefully drafted so as to apply only to those donations which are currently reportable.
The PHAA called for the banning of all corporate donations to political parties:
The pursuit of strong public policy on public health issues often involves countering corporate influence on government policy making that undermines the public good, particularly where business sectors which are responsible for unhealthy foods, products, services and industries are operating to distort public decision making and regulation to their financial benefit.
The Committee notes the Bill in its current form would potentially place considerable additional administrative and financial burdens on the Australian Electoral Commission; minor political parties; independents; community groups; charities; and third parties.
Legislative change cannot be made in a haphazard way by just examining one section at a time. Committees have an obligation to consider the proposed legislation as part of a holistic deliberation taking into consideration all the potential ramifications for that change, particularly on smaller organisations, civil society groups and individuals.
On 27 November 2018, the Government passed the Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Act 2018. In November 2020, the Committee will be undertaking a review of this new legislation, which will include a holistic examination of the current disclose regime of political donations.
The Committee recommends that the Bill not be passed.
Senator the Hon James McGrath