This chapter examines key issues discussed in submissions received by the Senate Finance and Public Administration Legislation Committee (the committee) during its inquiry into the Commonwealth Electoral Amendment (Banning Dirty Donations) Bill 2020 (the bill).
In particular, it will consider:
interpretive and administrative challenges of the bill;
prohibiting certain industries from making donations;
This chapter concludes with the committee's views and recommendation.
The committee received relatively few submissions in total, with the majority of submitters to the inquiry expressing support for the measures proposed in the bill. Many submissions were from either politically active organisations or individuals who were concerned about the perceived undue influence of donations on political decision-making and growing public distrust in Australia's political institutions.
Generally, these submitters considered that the measures proposed in the bill would assist in strengthening the integrity and accountability framework of Australia's electoral system and 'level the playing field' for those participating in the political process (after narrowing the extent to which some actors could participate). However, a number of submissions engaged with the detail of the bill and revealed some fundamental problems. These are discussed later in this chapter.
A number of submitters expressing support for the bill suggested there was the potential for donations to 'buy' political influence and undermine democratic processes. For example, the Australian Conservation Foundation (ACF) told the committee that:
Large political donations are meant to buy access and political influence. While political donations are an important form of political participation, without regulation and appropriate limits, unfettered political donations can lead to a system of political participation where those with the largest wallets are able to wield the most influence.
Other submitters, such as the Pirate Party Australia (Pirate Party), were of the view that large donations have weakened public trust in the integrity of political decision-making:
Unlimited contributions from industries with interests that are arguably at odds with the well-being of Australians leads to decision-making by elected officials that [is] opaque, corrupt and unrepresentative.
The committee notes that the Commonwealth Electoral Act 1918 (Electoral Act) contains a number of provisions under Division 4 of Part XX which require the disclosure of donations to the Australian Electoral Commission (AEC). While some submissions commented on Australia's political finance regime more broadly, the focus of the present inquiry is on the content of the bill, rather than the Electoral Act.
Submitters that supported the measures proposed in the bill also highlighted disparities between the political finance regimes in Australia's states and territories and internationally. For example, the Public Health Association Australia submitted that the bill's proposal to prohibit certain industries from making donations would complement donor prohibition laws already in effect in New South Wales (NSW) and Queensland. The Accountability Round Table (ART) also compared the political finance disclosure requirements set out in the Electoral Act with legislation in other jurisdictions, with a particular focus on legislation imposing caps on expenditure in addition to caps on donations.
Of those submitters who supported the bill in principle, most also suggested amendments to the proposed measures, and recommended additional changes to the political donations regime. These matters are outlined below.
Interpretive and administrative challenges of the bill
As discussed in Chapter 1 of this report, the bill seeks to expand the definition of 'gift' under Part XX of the Electoral Act, and defines 'political donation' as a gift made to or for the benefit of a political party (including a State branch of a political party), members of Commonwealth Parliament, candidates, political campaigners or associated entities.
The ACF offered its support for the inclusion of subscriptions and membership fees in the proposed new definition of 'gift'. The ACF argued that this captured 'the ways that different types of entities raise funds which are later used to incur electoral expenditure'.
Relevantly, in Senator Waters' second reading speech, she emphasised that it was not the bill's intention 'to limit donations to political campaigners or other entities to support their non-campaign activities'. However, Professor Anne Twomey, a professor of constitutional law at the University of Sydney submitted that the bill considers a 'gift made to or for the benefit of a political campaigner' as a political donation and makes no qualifications to indicate that donations made for 'non-campaign activities' would be exempt. Accordingly there is a fundamental gap between the intention of the bill's sponsor and the provisions of the bill.
Professor Twomey also observed that the proposed new definition of 'gift' referenced in the meaning of 'political donation' in proposed Division B (and by assumption Division C) would cap donations to political campaigners 'regardless of whether or not [the donation was] made for some other purpose'. Professor Twomey concluded that it was inappropriate to restrict the capacity of political campaigners to undertake 'charitable works, business activities or non-political advocacy roles' and questioned if the new definition would impact foreign donations or if it would create any impractical administrative burdens.
The new definition in the bill appears to involve unintended consequences for charities that engage in electoral activities, because they may rely in large part on fundraising events for their core charitable work, not just for sponsorship of their secondary political activities.
The Human Rights Law Centre deemed the bill's impact on political campaigners 'discriminatory' and stated:
Under the Bill, household charity names that qualify as political campaigners because they advocate strongly on their issues in the lead up to an election will be prevented from receiving small donations for any purpose. This will mean charities and not-for-profits will treat the threshold for becoming a political campaigner as a de facto spending cap. The law will place no equivalent restrictions on the income of corporations and industry associations because they do not rely on donations or membership fees, but rather revenue and levies.
Similarly, the ACF submitted that capping donations to political campaigners would 'have an inequitable impact by silencing certain types of political campaigners while leaving others unimpeded in their electoral campaigning'.
It is important to note that political campaigners are regulated in Australia because they can and do spend substantial amounts of money in order to influence election results. According to AEC data, over 2018–19 to 2019–20 political campaign groups spent over $45.5 million influencing Australians' votes. This campaigning can include online advertisements, phone campaigns, handing out how to vote cards and television advertisements on election issues. Unlike political parties, these organisations are not accountable at the ballot box.
Legislation was enacted with bipartisan support in 2018 to ensure that political organisations that spend over $500 000 in a financial year on federal campaigning will have disclosure obligations in-line with political parties, and will be subject to the same ban on foreign political donations. Without a consistent approach, any ban or cap on certain political donations would be ineffective as it could be circumvented by channelling otherwise prohibited donations through political campaigner organisations.
Prohibiting certain industries from making donations
Most submitters were generally supportive of the prohibited donors listed in proposed section 314AI of the bill.
Additionally, the committee received evidence from one submitter who, recognising the negative impact of obesity on the community, recommended that the soft drink, snack food, chocolate and confectionery manufacturing industries, as well as the fast food and takeaway service industry be added to the proposed list of prohibited donors.
This demonstrates that an approach of legislating bans on selected industries from donating has the potential to open the door to further industries being banned in the future based on subjective political views and values judgements.
Some submitters who expressed their support for the bill also noted that proposed measures did not obstruct the industries listed as prohibited donors from lobbying and expressing their political views in other ways. For example, Dr Bruce Baer Arnold, an Assistant Professor at the University of Canberra's Law School, submitted:
Their freedom to advocate and otherwise communicate will thus not be impermissibly restricted. They will not be silenced. They will not be prevented from meeting with Ministers, MPs, officials and journalists. They will not be prevented from contributing to industry consultations and public inquiries.
They will however not be able to buy influence.
While the majority of submitters broadly supported the bill's proposal to ban certain industries from making political donations, many also revealed shortcomings which would impede the bill's ability to achieve its stated purpose––to prevent 'certain industries that have used, or have a strong public perception of using, political donations to influence policy decisions'.
For example, submitters opposed to the proposed ban expressed concerns about excluding certain groups from participating in the political process. The Science Party was of the view that the proposed list of prohibited donors was partisan and had 'less to do with limiting the potential for corruption and more to do with the advancement of certain policy points' in favour of the Australian Greens.
The list of industries that would be banned under this bill is highly selective and the basis on which they were selected is far from clear. Some submitters noted that it was not evident how all these industries are connected to the legislative remit of the Commonwealth. There is no objective replicable methodology to explain how the industries are chosen, aside from assertions that these are industries perceived to have a potentially corrupting influence. Conversely, this list does not include a wide range of industries that have a strong interest in federal legislative and policy settings.
Some submitters also identified weaknesses in the bill's enforcement mechanisms. Ms Geraldine Gillen (although generally supportive of the ban) raised concerns about prohibited donors making donations through subsidiary companies and suggested the disclosure of links between prohibited industries and subsidiaries for 'complete transparency'.
Similarly, the ACF highlighted that the industry-specific bans would be difficult to enforce as it did not prevent prohibited donors from seeking influence through other means. The Science Party shared this view and argued it was:
… naïve to think that organisations that previously donated large amounts of cash to political parties would not spend similar amounts through other channels to promote their preferred parties or candidates at election time.
With regard to the administrative aspects of proposed Division 5B regarding prohibited donations, one submitter––the Pirate Party––echoed concerns previously expressed by the Senate Scrutiny of Bills Committee in relation proposed section 314AN. The Pirate Party pointed out that proposed section 314AN does not provide grounds for an appeal of the merits of any decision by the AEC regarding a determination of whether a person is considered a prohibited donor. The lack of merits review pre-supposes that the AEC could reach a decision with ease, as to whether an organisation with unique or complex characteristics would fall within one of the banned categories. Given that the bill impacts on fundamental freedoms to participate in the workings of democracy, this is a significant omission.
Professor Twomey also asserted that some industry-specific bans would be more appropriate to be exercised by the states and territories in circumstances where the risk of corruption is more prevalent at the state and territory level:
Some of the categories of donor that are prohibited are not prohibited in any State, and some others are prohibited in some States. In some cases, the category of industry involved is not particularly relevant to a risk of corruption at the State level. For example, as the defence power is exercised by the Commonwealth, rather than the States, it is unlikely that there is a significant risk of corruption of State elections by donations from defence industry entities.
Many submitters also revealed that the bill's proposal to ban donations from specific industries would likely contravene various aspects of the Australian Constitution. These concerns are discussed in more detail later in this chapter.
Submitters were generally more supportive of the bill's proposal to cap donations at $3000 from any source during an election term, compared to the proposal to exclude specific industries from donating altogether.
Mr Benjamin Cronshaw, for example, was of the view that the proposed cap 'would help to level the playing field and prevent any donor from having or being seen to have undue or excessive influence'.
Professor Twomey pointed out the contradictory intent of various provisions in the bill, noting that bans on specific industries become unnecessary if there is a simultaneous cap on donations that prevents any organisation from leveraging its financial strength. Professor Twomey submitted:
The perception, or indeed the reality, of corruption caused by the reliance of political parties and candidates upon political donations is corrosive of public trust in the democratic system. I support imposing caps on political donations. This is the best way of undermining the use of donations to buy influence. One person’s $3000 is worth as much as the $3000 donation of anyone else. If such laws are not circumvented and are effective, the consequence is that great wealth cannot buy great access or influence government decision-making (unless it is applied in other corrupt ways).
While submitters largely agreed that the bill's proposal to cap donations would achieve its purpose to reduce 'the potentially corrupting influence of large donations, irrespective of their source', there were divergent views among submitters as to the amount at which the cap should be set.
In this respect, some submitters expressed support for the proposed cap of $3000 and others argued that the cap should be lower. For example, the ART recommended a cap amount of $1000 to reduce pressure on political party candidates to fundraise for their campaign.
Other submitters argued that the cap should be set at a higher amount. For example, the ACF recommended that the cap be set somewhere between $5000 and $8000 to reduce the possibility that consequential shortfalls in funding for political parties would 'need to be supplemented with increased taxpayer funding'. The Science Party was also of the view that the cap proposed by the bill was too low; especially when taking into consideration the cost of nominating in a federal election ($2000).
Additionally, the Science Party noted the perceived inequality that '[c]apping donations at 0.5% of some previous donation amounts after major parties … have grown their coffers and enjoy the benefits of incumbency severely limits newer players in the political system'.
Unions NSW was of the view that 'more thought [was] required on the appropriate level for any donation cap, and careful consideration needs to be given to ensuring that the implied right to political communication is protected'.
The bill makes no allowance for indexation of a donation cap, which would mean in real terms that it would deflate the allowable value of donations. Because the proposed cap starts from a low level, even a small number of repeat donations in the same year would place a single donor at risk of criminal sanctions.
Although the committee received little evidence concerning the bill's proposal to aggregate donations during the donation period, Professor Twomey questioned why the aggregation of donations applied with respect to the calculations 'and not to making of political donations themselves'.
As with the bill's proposal to ban donations from specific industries, several submitters expressed concerns that capping donations would also possibly contravene various aspects of the Australian Constitution. Other submitters asserted that donation caps would be constitutionally safer than prohibiting certain industries from donating altogether.
These concerns are discussed in the following section of this chapter.
As highlighted previously, a common theme presented in submissions was that any restrictions on political donations (or on political finance more generally) must be reasonably justified so as not to infringe upon the freedom of political communication and be consistent with the Australian Constitution.
Dr Baer Arnold argued that the implied freedom of political communication did 'not preclude proportionate regulation on funding of political parties and candidates, whether for election campaigns or for the ongoing operation of those parties'. In contrast, Unions NSW maintained that '[t]he issue of excluding particular entities from making donations is … fraught with constitutional complexity'.
It was put to the committee that there are two key constitutional issues in relation to the bill's proposal to ban donations from certain industries:
the bill may unreasonably exclude certain industries from donating to state and territory electoral campaigns; and
the bill may impede the implied freedom of political communication.
Gifts to state and territory electoral campaigns
As discussed in Chapter 1, proposed subsection 314AJ(1) would define a 'political donation' as a gift made to or for the benefit of a political party (including a State branch of a political party), members of Commonwealth Parliament, candidates, political campaigners or associated entities.
It was argued by Professor Twomey however, that this reference to a 'State branch' appears to include gifts made for the purposes of state electoral campaigns––and therefore subject to the proposed prohibited donor laws and caps––which may be unconstitutional.
Professor Twomey cited the ruling of Spence v Queensland  HCA 15, where a majority of the High Court of Australia (High Court) held that 'the Commonwealth power to make laws with respect to elections extends only to federal elections – not State elections' and that:
Accordingly, a Commonwealth law could not prohibit a State branch from receiving donations from property developers, etc, if the donations were made for the purpose of use in State electoral campaigns and not used for federal purposes, and the State law did not prohibit the donation.
The bill contains a departure from key provisions enacted in 2020 that ensure that Commonwealth electoral law only regulates federal donations and federal electoral activities, ensuring that State and Territory laws will exclusively regulate donations and electoral expenditure in their respective jurisdictions. The present Electoral Act avoids conflict of laws and constitutional overreach.
By contrast this bill would apply to political donations made for the purposes of a State or Territory campaign. Further, it would apply to various political actors including, for instance, state arms of a political party, where state electoral funding may be entirely segregated from other funds.
Implied freedom of political communication
The Human Rights Law Centre noted that legislation prohibiting certain industries from making donations in NSW and Queensland had been challenged in the High Court 'with mixed results'. The most significant cases and their rulings are summarised below:
Unions NSW v NSW  HCA 58––the High Court held that NSW's prohibition on donations from persons not on the electoral roll was unconstitutional for two key reasons. Firstly, the ban restricted the source of funds available to political parties and candidates to meet the costs of political communication; and second, the ban did not achieve the anti-corruption purpose of the legislation and thus the burden on the freedom was not justified.
McCloy v NSW  HCA 34––the High Court held that NSW's ban on donations from property developers was constitutionally valid, and noted the findings of bodies such as the NSW Independent Commission Against Corruption as evidence that the risk of corruption perpetuated by property developers on planning decisions to legitimately and proportionately justify the anti-corruption purpose of the ban.
Spence v Queensland  HCA 15––As in McCloy, the High Court held that Queensland's ban on political donations from property developers was also constitutional. The laws followed the findings of an investigation by the Queensland Crime and Corruption Commission which concluded that there was a particular risk of corruption associated with property developers. The High Court also held that it was reasonable for states and territories to legislate to mitigate risks of harm that were experienced in other state and territories.
The case history indicates that it is not certain that the prohibited donors proposed by the bill would survive a challenge in the High Court. In respect of McCloy and Spence, Professor Twomey questioned the justification of bans to industries 'in the absence of evidence of corruption and in circumstances where relatively low caps are imposed anyway'.
Putting to one side the question of whether there would be evidence that could satisfy the High Court that any particular industry named in the bill was included for a legitimate purpose, several submitters questioned if there was a need to ban donations from the specific industries listed in the bill if donation caps were to be imposed on all donors. Professor Twomey highlighted that:
If the donation of a property developer is capped at $3000, which is the same as the maximum donation of anyone else, then the property developer should not be capable, by making such a donation, of exercising an undue or corrupting influence. This raises a constitutional argument as to whether a ban on donations from certain categories of donors remains 'proportionate' and for a 'legitimate purpose' of preventing the risk of corruption, if caps are in place.
Unions NSW recognised that it may be justifiable to cap donations to 'prevent wealthy interests from having an unequal or disproportionate opportunity to participate in and influence the political process'. However, Unions NSW argued for caps to be set in a manner that does not exclude any participants from fully engaging in the electoral process.
The political donations regime is of enormous significance to Australia's democratic processes and institutions. In the committee's view, changes to this regime should only be made following comprehensive policy consideration, with the input of key stakeholders, to ensure that the regime continues to uphold the principles of transparency, clarity, timeliness and enforceability.
The committee notes that a number of submissions raised serious and compelling concerns about the constitutionality of measures proposed in the bill. The committee is not able to rule out the possibility that parts of the bill would be unconstitutional.
The bill includes a reference to gifts made to a state branch of a political party in its meaning of 'political donation'. The committee is mindful that it is not appropriate for the Commonwealth to dictate how state and territory electoral activities should be funded, as supported by the ruling of Spence v Queensland  HCA 15. Primary provisions of the bill therefore would likely be constitutionally invalid.
Further, the bill proposes to ban certain industries from making political donations without clear objective evidence or explanation of the basis for these proposed restraints. While the committee recognises that keeping Australia's electoral system free of undue influence is paramount to preserving the integrity of Australia's democratic institutions and elected representatives, it is unclear to the committee how the proposed bans would achieve the bill's stated purpose without unjustifiably excluding specific groups from freely expressing their support for particular causes or policy issues.
It is not apparent to the committee that rigorous policy research at the Commonwealth level has been undertaken to substantiate the perceived influence of each of the prohibited industries proposed by the bill, or to demonstrate why these industries were included while others were not.
The bill also proposes to cap political donations from any source at $3000 per parliamentary term (as determined from the day after one election until the next election). While cognisant of the perceived potential for influence arising from large donations, the committee is of the view that the bill would both unfairly and unreasonably limit Australians' democratic freedom to express support for particular causes or policies.
The committee notes that there is no consensus, either among the submissions received or in public debate more generally, on whether donation caps are appropriate or, if caps were in place, what level the cap should be set at. Indeed, the low level of the cap and the absence of an indexation mechanism would result in the cap diminishing in real terms over time.
The practicality of the bill is also severely limited by significant drafting and implementation issues. These issues were also identified and commented on in a large number of submissions received to the committee's inquiry.
Problems with the bill are entrenched in its definitions of 'gift' and 'political donation'. For example, the bill would expand the definition of 'gift' in Part XX of the Electoral Act to include subscription and membership fees, and attendance at fundraising events.
The committee believes that this expanded definition of 'gift' and 'political donation' would have severe implications for the important fundraising work undertaken by third party campaigners such as charities. The definition also ignores the fact that political parties themselves are inherently not-for-profit entities that are volunteer run and rely on constant fundraising activity to survive and communicate their policy ideas. Additionally, this definition would create an unreasonable administrative burden for Australians who choose to pay membership fees to various organisations.
The committee is concerned that the bill does not appear to have given consideration to the significant burden that its proposed measures would place on Australian taxpayers, as political parties and candidates would become reliant on public funding to finance their political activities. This is particularly the case given the growth in the number of constituents in each electorate over recent decades and the cost of communicating with these constituents in today's media environment.
A measure such as this would seem unworkable without an expanded public-funding system, yet the bill fails to address any such connected changes.
In addition to the significant concerns regarding constitutional validity and drafting issues discussed earlier in this chapter, the implementation of the bill would also be challenged by the unreasonable burden its proposals would place on the AEC, which would be the responsible body for the administration and enforcement of the bill's measures.
The committee recommends that the Commonwealth Electoral Amendment (Banning Dirty Donations) Bill 2020 not be passed.