3. Financial transparency and disclosure

Foreign donations

The intention of this Bill is to improve the financial transparency of the electoral system and remove foreign influence on Australian politics through:
removing foreign influence in the domestic political landscape; and
requiring greater financial transparency from all participants with significant political expenditure.

Original Bill

The original Bill created a scheme of requiring all donations greater than $250 and used for ‘political expenditure’ to be from an ‘allowable donor’. Submitters to the Committee’s first inquiry had a range of concerns regarding:
the definition of ‘allowable donor’;
the compliance burden proposed by the means to obtain ‘appropriate donor information’;
the allowable amount threshold; and
restrictions on foreign bank accounts.
In its April 2018 Advisory Report, the Committee expressed concerns that the proposed measures to address foreign financial influence on Australian politics were too complex. The Committee made recommendations aimed at simplifying the proposed scheme.1

Current Bill

The Government’s proposed amendments remove the inclusive ‘allowable donor’ classification to be replaced with an exclusive ‘foreign donor’ classification. In response to the Committee’s recommendations, the Government notes:
A definition of foreign donor is added to the Bill. Whereas the Bill bans political campaigners from receiving gifts from foreigners and foreign bank accounts, the draft amendments only bans gifts from foreigners. While third parties are prohibited from financing electoral campaigning with foreign money, they no longer need to keep foreign funds for their other activities in separate bank accounts.2
The current Bill restricts donations from a foreign donor depending on whether an organisation is a political campaigner or a third party.
‘Foreign donor’ is defined in proposed s. 287AA. It is a broad definition, including any individual that is not an elector, an Australian citizen or an Australian resident; and any entity that does not fulfil all three of the following:
the entity is incorporated in Australia;
the entity’s head office is in Australia; and
the entity’s principal place of activity is, or is in, Australia.
The Australian Council of Trade Unions (ACTU) raised the suggestion that s. 287AA may have a drafting flaw, in that it defines ‘an entity (whether or not incorporated)’ as a foreign donor if it does not meet any of three conditions, one of which is ‘the entity is incorporated in Australia’. The ACTU wanted assurance about how unincorporated organisations are treated under this section. However the section and the explanatory memorandum clarify that, to be non-foreign, an entity must merely meet any of the tests in 287AA(e), not all of the tests. An unincorporated entity such as the ACTU should be recognised as non-foreign because they satisfy either or both the head office test in (e)(ii) or the principal place of activity test in (e)(iii).

Political campaigner

If an organisation is a political campaigner under the Bill, it commits an offence if it receives a gift:
from a foreign donor;
greater than $1 000; and
‘acceptable action’ (i.e. returning the gift or passing the gift to the Commonwealth) is not taken within six weeks.3
This does not apply to a gift if:
the donor affirms in writing that they are not a foreign donor;
the recipient did not know, or have reasonable grounds to believe, that the donor was a foreign donor; and
for gifts over the disclosure threshold ($13,800) the recipient obtained ‘appropriate donor information’ or took reasonable steps to verify the donor was not a foreign donor.
There are two further exceptions to the offence, if:
the gift was made in a private capacity for the recipient’s personal use; or
if using the gift for the purposes of incurring electoral expenditure or creating or communicating electoral matter would be inconsistent with the terms of the gift.

Third party

If an organisation is a third party under the Bill, it commits an offence if it receives a gift:
from a foreign donor;
greater than the disclosure threshold (currently $13,800);
that is then used for incurring electoral expenditure or creating electoral matter; and
‘acceptable action’ (i.e. returning the gift or passing the gift to the Commonwealth) is not taken within six weeks.4
This does not apply to a gift if:
the donor affirms in writing that they are not a foreign donor;
the recipient did not know, or have reasonable grounds to believe, that the donor was a foreign donor; and
the recipient obtained ‘appropriate donor information’ or took reasonable steps to verify the donor was not a foreign donor.
‘Appropriate donor information’ is set out in proposed section 302P, which sets out a non-exhaustive list of ways by which an individual or entity can show that they are not a foreign donor. Any of the ten alternative forms of proof proposed under 302P will be deemed as satisfactory effort for the purposes of the Act and the table in the section is not a closed list of the forms of reasonable checks that a recipient can make. The Department of Finance indicated during the public hearing that a further two items could be easily added to the list, in response to suggestions from the philanthropic sector about appropriate forms of evidence to verify the non-foreign character of an Australian trust or foundation.5
The amendments also allow regulations to be made to add further types of satisfactory evidence to the options provided in 302P. Future additions to the list should be informed by feedback to the AEC from relevant organisations.
In addition to a direct ban on foreign donations, the amendments propose a mechanism to prevent the movement of foreign funds through multiple organisations to appear as local funds for political expenditure, in response to the Committee’s April 2018 Report. The amendments propose:
Anti-avoidance rules [to] address the movement of foreign funds between organisations. As part of the anti-avoidance rules, the Commissioner can require an organisation that is part of a scheme to report as a political campaigner or associated entity, or can order that people stop a scheme or not participate in it. The rules also ensure that Commonwealth laws apply exclusively to amounts that are used or available for use in federal elections, so that foreign donations cannot be inappropriately shielded by ambiguity about the jurisdiction in which those funds were intended to be used. This integrity rule still ensures that donations given for state and territory elections are, appropriately, fully under the laws of those jurisdictions.6

Additional offence

Proposed s. 302F creates an additional offence for both recipients and donors of foreign donations. Under this provision, an offence is committed by a political entity, political campaigner or third party if:
a gift is made by a foreign donor; and
either the recipient knows the foreign donor intends the gift to be used for electoral expenditure, or the recipient accepted the gift intending to use it for electoral expenditure; and
‘acceptable action’ (i.e. returning the gift or passing the gift to the Commonwealth) is not taken within six weeks.
This offence does not have any value threshold or any exceptions.

Evidence received

All of the Committee’s recommendations in Chapter 3 of its April 2018 Advisory Report have been addressed. Although generally supportive of the changes, submitters raised some concerns about the implementation of the proposed amendments, and, in particular, the offence provisions relating to donor identification.
Overall, evidence to the Committee showed support for narrowing the restrictions on foreign donations to activities that influence voters. Australian Environmental Grantmakers Network pointed out the impact on international donations:
We note that the amended bill prohibits third parties from financing electoral activities with foreign funding, but does not prevent a charity from using international philanthropy for all other issue­based policy advocacy activities. This is a significant improvement.7
Charities remained concerned about the evidentiary burden of collecting information about donors to ensure compliance with these provisions. Hands Off Our Charities (HOOC) suggested that the compliance burden of checking should not sit with the charity, but with the Australian Electoral Commission:
HOOC recommends that in order for the amendments to pass and meet the red line principles, the process of checking if a donation comes from a foreign donor should only apply if the donation is intended to be used for electoral expenditure. Additionally, to allow for donor privacy to be maintained and reduce the compliance burden on charities and NFPs, the process of checking if a donor is foreign should sit with the AEC rather than with the recipient organisation.8
However the Committee notes that there are alternatives to the HOOC proposal to limit the burden on charities, without entirely absolving them of an appropriate level of obligation to show care in relation to large donations.
Some submitters were concerned about the practicality of determining whether a donor was a foreign donor, as set out in s. 302P. Some witnesses were unaware of or unfamiliar with the AEC enrolment look-up tool (check.aec.gov.au). Views were given that the requirement to see whether an individual was on the electoral roll was subject to some limitations. Anyone can check an individual’s enrolment on the AEC website, provided they just enter the individual’s name and address exactly. Given the significance of tax deductibility as part of the charitable law in Australia and the charitable gifting culture, it is already common for charities to issue receipts to donors including name and address information.
The AEC enrolment look-up tool also requires that each individual’s information is entered separately, which led to a claim that this could be time-consuming for checking large numbers of donors. However the ACNC Commissioner Mr Gary Johns observed that the requirement could not be onerous in the context that it is only relevant to checking the identity of donors who have gifted amounts in excess of the disclosure threshold ($13,800):
I agree that it’s easy if you’re looking at very few donors.9
The Committee also heard evidence about the documentation required to show that a trust is not a foreign donor. Proposed s. 302P provides a non-exhaustive list of options for checking whether a donor is not foreign. Where a donation has come from an unincorporated entity, under s. 302P the recipient could access at least three official documents showing that high-level decisions are made in Australia, or that the entity’s activities are carried out in Australia. Ms Alice Macdougall from the Law Council of Australia explained:
Philanthropic foundations that are trusts would fall into the category 3 of section 302P. I'm not sure if they'd even be able to provide or would want to provide those documents, and I'm not sure why something like being registered with the ACNC or providing a copy of the trust deed which shows that the governing law is in Australia couldn't be good options.10
The same suggestions were made by Philanthropy Australia, in relation to donations made by trusts and foundations.

Offence created by proposed s. 302F

Many submitters raised concerns about the proposed offence in s. 302F in relation to donation recipients. The explanatory memorandum says that this section introduces penalties for gift recipients who knowingly receive a gift from a foreign donor, intending to use the gift for electoral expenditure, or knowing that the donor intends the gift to be used for electoral expenditure. The offences can apply outside Australia, and carry lower penalties for third parties than political campaigners.
The concern arose from the apparent breadth of the provision and a lack of clarity in how it is drafted. GetUp stated:
The proposed section 302F implements a blanket prohibition on political campaigners accepting gifts from foreign donors for the purpose of incurring electoral expenditure, or for the dominant purpose of creating or communicating electoral matter. It further notes that this offence applies to any gift (even $1), and applies irrespective of whether the gift is actually used for the prohibited purpose. To be compliant, a political campaigner must positively ascertain that every single donor (no matter how small their donation) is not a foreign donor.11
The explanatory memorandum explains that the fault element for this offence is the same as that for 302D, that is, recklessness.12 This means the offence would occur if a recipient was planning to use funds for electoral expenditure, and was reckless as to whether any donor was a foreign donor. Professor Anne Twomey gave an example:
Whenever a third party, such as a charity, fund-raises for the purposes of running an issues campaign (eg a trivia night or a lamington stall to support a campaign to save an endangered species, or stop fracking, or increase school funding to a particular sector) there is going to be a substantial risk that one or more of the persons attending or donating will be a person who is neither an Australian citizen nor a permanent resident. The third party will then have to take a difficult decision as to whether that risk is ‘unjustifiable’ or whether it should check the status of everyone donating.13
This fault element is however supported in relation to the other offences that relate exclusively to accepting large donations. The Synod of Victoria and Tasmania, Uniting Church in Australia stated:
The Synod supports that the fault element in section 302D be recklessness. The bar would be too high if the fault element had been set that person or entity had direct knowledge the donor was a foreign donor.14
The Law Council of Australia also drew attention to the lack of a monetary threshold for the s. 302F offence, and the possible outcomes:
This raises a practical challenge for third parties, particularly charities, who may wish to engage in electoral expenditure, as they will need to be satisfied that this activity is sourced from very specific funding, and not drawn from general donations without the charity first capturing relevant information on citizenship and residency of each donor. This has obvious implications for public fundraising campaigns where it may be impractical, if not impossible, to confirm the citizenship of each donor.15
The Law Council of Australia suggested that this provision should be more aligned with ss. 302D and 302E, where questions of nationality should only be required for donations over a certain threshold.
The Centre for Social Impact Swinburne suggested that the provision was not drafted in a way that reflected the intent as set out in the explanatory memorandum:
Although paragraph 150 of the explanatory memorandum states that the section covers ‘gift recipients who knowingly receive a gift from a foreign donor’ (emphasis added), the section itself does not provide for this.
As currently drafted the section imposes strict liability – if a donation of any amount for the purposes of electoral expenditure is received from a donor who happens to be foreign, the financial controller of a political campaigner or agent of a third party is liable irrespective of whether they knew the donor was foreign or not.16
The Human Rights Law Centre (HRLC) agreed that the drafting of s. 302F does not capture the policy intent of ‘creating an offence where the organisation knows the donor is foreign and still uses the gift for electoral expenditure’, and gives examples of how this will cause practical problems. The HRLC and the Centre for Social Impact Swinburne recommend that s. 302F should be redrafted.17
Many witnesses questioned the ambiguity and lack of clarity over this provision, and were uncertain as to how a third party or political campaigner would be able to avoid breaching s. 302F. GetUp reflected these concerns:
We believe that it is manifestly unfair to force civil society organisations engaging in public interest advocacy to operate under this level of ambiguity and potential legal risk. We believe that this provision would clearly have a chilling effect on community advocacy. And considering this provision would apply to very small donations, we believe it is completely out of proportion to the scale of the risk.18
In a practical sense, the administrative requirement as presently drafted was perceived to outweigh the potential for foreign influence in elections, as Professor Twomey put:
Is it really the sort of problem that you're directing this legislation against? Are you really concerned that a foreign national will turn up to a trivia night and pay $10 to attend?19

Committee comment

As a preliminary point, the Committee notes that these provisions do not create an offence of failing to gather appropriate donor information for all donations. All the offence provisions are triggered only when a donation is actually received from a foreign donor. Any organisation can manage the risk of foreign donations as they see fit, including taking no steps to verify a donor’s identity. This, in itself, is not an offence under the Act.
The Committee also notes that the methods for obtaining donor information in s. 302P are not exclusive. Political campaigners and third parties may also take other ‘reasonable steps’ to verify that a donor is not a foreign donor in order to avoid the offences in ss. 302D and 302E. This allows organisations some flexibility in how they ascertain the status of donors.
Having said that, the Committee does consider that some amendments to s. 302P, to further broaden the types of evidence that is deemed to be adequate, would make it more suitable. In particular, the Committee recommends that a recipient should be able to use other evidentiary documents such as the trust deed, or checking registration of the trust as a charity in Australia.
The Committee considers that a trust deed is suitable evidence that should be added to the list in s. 302P, given that it will confirm whether a trust is governed under the law of a state or territory jurisdiction. It should be noted that s 302P(3) also permits a trust to omit, redact or delete information from such a document that is not relevant to the purpose of the section (information that is extraneous to the fact that the trust is governed by Australian law).
In relation to s. 302F, the Committee notes the level of concern about the broad application of this provision as currently proposed, and the perception that it has potential to impose a disproportionate administrative burden on recipients.
The Committee therefore recommends that s. 302F be redrafted to redefine the fault element so that the offence requires a recipient to have actual knowledge that the donor is foreign. While acknowledging evidence that actual fault can be difficult to prove, the Committee notes that larger donations are also subject to separate offences that have a mental element of recklessness.
This change would ensure that s 302F operates appropriately as a ‘backstop’ offence, to deal with deliberate contravention of the foreign donor ban, and would give charities and other political actors a very strong assurance that the due diligence that is required from them is proportionate to the value of a donation. In practice this will mean that recipients will use a ‘tick box’ on donation forms as the first form of assurance, to ensure amounts over $1,000 are not from foreign donors. Only for amounts exceeding the donation threshold would more diligent checks be required ($13,800 and over in 2018-19).
The Committee also recommends introducing a minimum threshold of $100 into s. 302F. This would prevent an offence occurring where a small value donation was knowingly received from a foreign donor; for example tourists contributing to a collection bucket.
Bucket donations are an important part of charitable receipts that can be gathered in busy environments, so it can be impractical to require tick box forms of proof for such donations or to engage in discussion with prospective donors on their eligibility to donate. A $100 threshold is appropriate for bucket size donations and would be an appropriate level that does not open a loophole for avoidance.

Recommendation 5

The Committee recommends that s. 302F be redrafted to:
redefine the fault element so that the offence requires a recipient to have actual knowledge that the donor is foreign; and
introduce a minimum threshold of $100 before there is an offence under this provision.

Recommendation 6

The Committee recommends that s. 302P be amended so that a recipient is able to use other means to determine the status of a trust or foundation; including evidentiary documents such as the trust deed, or by checking registration of the trust as a charity in Australia.

New Zealand special category visa residents

Under the proposed meaning of foreign donor20 Australian residents are not considered to be foreign donors and therefore may make political donations. This would create an anomaly for New Zealand citizens who are residing in Australia on a Special Category visa (subclass 444) as they are not considered permanent residents under this visa class.21
Like permanent visa holders, these New Zealand citizens may be long-term residents and taxpayers. Although they are unable to vote, making donations or contributing to campaigns may be an important way for them to participate in the Australian democratic process in a way consistent with their legitimate interests in Australian public affairs.
The Committee considers that the holders of this visa should not be considered foreign for the purposed of s. 287AA.

Recommendation 7

The Committee recommends that s. 287AA be amended so that New Zealand citizens that are Australian residents on a Special Category visa (subclass 444) are excluded from the definition of foreign donor.

Non-financial disclosures and penalties

Political affiliation declarations

The original Bill required senior staff of both political campaigners and third party campaigners to provide information regarding their political affiliation.
The current Bill removes this requirement for third parties, but retains it for political campaigners. Under s. 314AB(2)(b)(i), political campaigners must include in their annual return ‘any membership of any registered political party’ of senior staff.
A number of submitters raised concerns with this provision. The Centre for Social Impact Swinburne explained:
Section 314AC(2)(b)(i) specifies that a political campaigner must include in its annual return to the AEC information about the political party memberships of its senior staff.
It is highly inappropriate to require disclosure of the political affiliations of individuals to a government agency merely because those individuals work for an entity which is engaged in our democratic processes.
The ability to hold political beliefs and express them through membership of a political party is a private matter. Requiring the disclosure of such information would be an invasion of this privacy, and has no benefits in terms of providing transparency.22
The Human Rights Law Centre agreed:
The right to freedom of association protects the right of all persons to join political parties. The obligation to disclose party membership impacts on this right for two reasons. First, a person may wish to keep their party membership private for a range of valid reasons. If their membership is to be exposed, they may choose to resign their membership rather than to have it be publicly available.
Secondly, a staff member may choose to resign (or not take up) party membership out of concern for reputational risks to their employer. Accordingly, this provision may deter senior staff wishing to be members of political parties. The ability to privately hold a political affiliation is a pillar principle of our democracy and should not be restricted lightly. Any perceived benefit in obtaining this information is outweighed by the impact on freedom of association and by the dangerous precedent it would set around governments forcing organisations to disclose party membership.23

Financial controller liability

In response to concerns about the personal liability of financial controllers, the amended Bill shifts this liability in relation to third parties, from the financial controller to the entity. However, it retains this personal liability with financial controllers for political campaigners.
The ACNC and GetUp submitted that political campaigners that are legal entities should be held liable for breaches under the Bill, rather than financial controllers being personally liable.24

Committee comment

In relation to the political activities of senior staff, the Committee notes the concerns of submitters that this could be an invasion of the privacy of individuals. The Committee considers that, in some circumstances, a loss of privacy is justifiable to increase transparency in our electoral processes. However, in this case, the Committee notes the evidence that membership of a political party for senior staff is not necessarily determinative of the affiliations of a political campaigner organisation.
A requirement for public reporting of such private information has no precedent in the Electoral Act or in any other Australian law that the committee is aware of, so a strong case would be required before the Committee could be convinced of the importance of this requirement. Even though the information could be indicative of ‘front group’ arrangements, suggestions were made that individuals who could be subject to this requirement might resign their party memberships. The Committee considers this to be a credible prediction for how the rule would work in practice and on that basis notes that there was no contrary evidence surfaced in the inquiry to show how this information might be useful for the effectiveness of the regime. The Committee considers that this requirement should be removed.
The Committee considers that personal liability for financial controllers is not unreasonable in the context of political campaigners, given the influential role that such high-spending organisations can play in an election. The Committee notes that recourse to personal liability could only apply to organisations that are spending very significant sums of money on electoral expenditure.
The Committee notes that personal liability can be a significant motivation for the controllers of an organisation and should encourage them to engage in compliant behaviour. If this form of liability were removed from the amendments, then industry associations representing prosperous players in the economy would face reduced consequences for breaches of the law. The Committee considers that the largest political actors should be held to a high standard and principal actors in such organisations who are responsible for breaches of the foreign donation regime should not be able to hide behind a corporate veil.

Recommendation 8

The Committee recommends that the requirement to disclose the political affiliation of senior staff on the proposed Transparency Register be removed.

Public election funding

The original Bill proposed public election funding to be paid after the public funding rate threshold (having received 4 per cent of first preference votes) had been met, at the lesser of either:
the public funding rate;25 or
the amount of electoral expenditure occurred in the election period that has been claimed and accepted by the Electoral Commissioner.
The Committee supported this proposal in its April 2018 Advisory Report although, in the interest of lessening the regulatory burdens on all actors, and in particular independent and micro-party candidates, recommended that a minimum threshold be established before requiring substantiation for public funding claims.
The proposed amendments provide for the automatic payment of the first $10,000 of public election funding to eligible candidates before substantiation is required.

Recommendation 9

Following the passage of the legislation, the Committee recommends that the Australian Electoral Commission ensure that the candidate handbook makes clear the need to keeps receipts for substantiating possible public funding claims for electoral expenditure incurred.

AEC resourcing

In its April 2018 report, The Committee recommended that the AEC be adequately resourced to implement the new arrangements and is pleased to note that $56.5 million was provided over four years in Mid-Year Economic and Fiscal Outlook (MYEFO) to implement the proposed arrangements.26

  • 1
    JSCEM, April 2018, Advisory report on the Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017. Recommendations 8-11. Available at www.aph.gov.au/em.
  • 2
    Minister for Finance, September 2018, Key amendments addressing recommendations of the Joint Standing Committee Advisory Report, p. [1].
  • 3
    Proposed s. 302D
  • 4
    Proposed s. 302E
  • 5
    Stein Helgeby, Deputy Secretary, Department of Finance, Committee Hansard, Canberra, 5 October 2018, p. 51.
  • 6
    Document accompanying exposure draft ‘Key amendments addressing recommendations of the Joint Standing Committee Advisory Report’, Department of Finance, October 2018, p. 2.
  • 7
    Australian Environmental Grantmakers Network, Submission 6, p. 2
  • 8
    HOOC, Submission 27, p. 10.
  • 9
    Gary Johns, Commissioner, ACNC, Committee Hansard, Canberra, 5 October 2018, p. 2.
  • 10
    Alice Macdougall, Law Council of Australia, Committee Hansard, Canberra, 5 October 2018, p. 15.
  • 11
    GetUp, Submission 34, p. [2].
  • 12
    Exposure Draft: supplementary explanatory memorandum, September 2018, p. 36.
  • 13
    Anne Twomey, Submission 2, p.4.
  • 14
    The Synod of Victoria and Tasmania, Uniting Church in Australia, Submission 31, p. 2.
  • 15
    Law Council of Australia, Submission 8, p. 4.
  • 16
    Centre for Social Impact Swinburne, Submission 22, p. 6.
  • 17
    Centre for Social Impact Swinburne, Submission 22, p. 6, and Human Rights Law Centre, Submission 23, p. 7.
  • 18
    GetUp, Submission 34, p. [2].
  • 19
    Anne Twomey, Committee Hansard, Canberra, 5 October 2018, p. 17.
  • 20
    Proposed s. 287AA
  • 21
    See: Department of Home Affairs, website, Special Category visa (subclass 444) https://www.homeaffairs.gov.au/trav/visa-1/444-, accessed 8 October 2018.
  • 22
    Centre for Social Impact Swinburne, Submission 22, p. 5. See also Hands off our Charities, Submission 27; Australian Conservation Foundation, Submission 21; RESULTS International, Submission 19; Human Rights Law Centre, Submission 23; Australian Council of Social Service, Submission 29.
  • 23
    Human Rights Law Centre, Submission 23, pp. 4-5.
  • 24
    ACNS, Submission 13; GetUp, Submission 34;
  • 25
    A per-vote payment for candidates that receive over 4 per cent first-preference votes.
  • 26
    Treasurer, December 2017, Mid-Year Economic and Fiscal Outlook, p. 151.

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