Chapter 1Introduction and background
Referral
1.1On 4 September 2023, the Electoral Legislation Amendment (Fairer Contracts and Grants) Bill 2023 (the bill) was introduced into the Senate by SenatorLarissaWaters.
1.2On 7 September 2023, pursuant to the recommendations of Report No. 10 of 2023 of the Senate Selection of Bills committee, the Senate referred the bill to the Senate Finance and Public Administration Legislation Committee (the committee) for inquiry and report by 4 March 2024.
Conduct of the inquiry
1.3The committee agreed to open submissions on 7 September 2023 and set 20October 2023 as the closing date. The committee wrote to a range of key stakeholder groups, organisations, and individuals, drawing their attention to the inquiry and inviting them to make a written submission.
1.4The committee received 4 submissions, which are available on the committee's webpage and listed at Appendix 1.
1.5The committee held a public hearing on Monday, 5 February 2024. The witness list can be found at Appendix 2.
1.6Details of the inquiry, including links to the bill and associated documents, are published on the committee's website.
1.7The committee thanks all those who contributed to the inquiry by making submissions and giving evidence to the committee at the public hearing.
Report structure
1.8The rest of this chapter sets out the issue and the current situation, followed by the purpose and provisions of the bill.
1.9Chapter 2 outlines the key issues put forward in evidence and presents the committee's views and recommendation.
The issue—the influence of big money on politics
1.10This bill sits within a broader discussion, in Australia and other democracies, around the need for reform to prevent big money influencing political processes and undermining democratic institutions.
1.11Indeed, the Joint Standing Committee on Electoral Matters (JSCEM) recently inquired into, and reported on, many of these matters. The JSCEM tabled an interim report for its inquiry into the conduct of the 2022 federal election and other matters in the Senate on 20 June 2023, stating:
'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'.
1.12The JSCEM made recommendations for reforming the political donations process in three key areas, namely lowering of the disclosure threshold, real time disclosure, and caps on election donations and expenditure:
Recommendation 1: The Committee recommends that the Australian Government lower the donation disclosure threshold to $1000.
Recommendation 2: The Committee recommends that the Australian Government introduce 'real time' disclosure requirements for donations to political parties and candidates.
Recommendation 3: The 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.
Recommendation 4: The Committee recommends that the Australian Government introduce donation caps for federal election donations.
Recommendation 5: The Committee recommends that the Australian Government introduce expenditure (also known as spending) caps for federal elections.
1.13The proponent of this bill, Senator Waters, argues that the bill's proposed amendments to the Commonwealth Electoral Act 1918 are necessary to prevent political donations being made that could influence the outcome of contracts, tenders, grants, approval, licence, and permit processes.
The current situation
1.14Part XX of the Commonwealth Electoral Act 1918 (the Act)provides the legislative framework for election funding and financial disclosure. This part deals with the funding of registered political parties, candidates, and groups. It also deals with gifts and other financial matters relating to parties, candidates, groups, political campaigners, significant third parties, third parties and associated entities.
1.15The Act restricts the amount of money that can be donated by foreign entities to a political party to $1000. However, there is no cap to the amount an Australian entity can donate to a candidate.
1.16Regarding the timing of disclosures of gifts, Members of the House of Representatives (MPs), Senators, registered political parties, significant third parties, third parties, associated entities, and annual donors are required to disclose details relating to amounts received in an annual return.
1.17Registered political parties and their state and territory branches, significant third parties, and associated entities must lodge an annual return by 20 October each year.
1.18MPs and Senators who receive one or more gifts for federal purposes, third parties that incur electoral expenditure above the disclosure threshold, and annual donors must lodge an annual return by 17 November each year.
1.19Candidates, senate groups, and election donors must submit an election return no later than 15 weeks after the polling day.
Purpose of the bill
1.20The bill seeks to address some of the issues identified by the JSCEM. SenatorWaters argued that the bill seeks to restore public trust and confidence in Parliament and politicians regarding the allocation of government resources. In her Second Reading Speech, Senator Waters stated:
Public trust in parliament and politicians is at an all-time low, and the community feels less and less confident that their representatives represent them, rather than doing the bidding of their corporate donors.
1.21In practical terms, the bill seeks to address shortcomings in Australia's electoral system by limiting the ability for political entities in government to receive donations above a lowered disclosure threshold. The explanatory memorandum states:
These amendments will increase public confidence that decisions regarding allocation of government resources are guided by the public interest, rather than the interests of donors. The amendments seek to prevent donors from swaying donations in their favour.
Key provisions of the bill
1.22The bill is comprised of one schedule with six items which would amend the Commonwealth Electoral Act 1918 and would commence the day after RoyalAssent.
1.23Proposed section 302A provides that gifts to the political party in government, including to a coalition partner, are prohibited for any corporation or close associates of the corporation 12 months before or after the corporation has made any application or entered into a contract for Commonwealth money, or applied for certain approvals under a law of the Commonwealth.
1.24Applications for a Commonwealth grant, tender or approval are also prohibited for 12 months before or after a corporation or close associated of the corporation has made a gift.
1.25Proposed section 302B provides a new definition of 'close associate' of a corporation. The new definition includes a related body corporate, a director or officer of the corporation and their spouse, person with more than 20 per cent voting power in the corporation and their spouse, or a lobbyist engaged to conduct lobbying activities on behalf of the corporation.
1.26Proposed section 302BA inserts a new definition of 'prohibited donor' and 'prohibited gift recipient'. The new definition of a prohibited donor in new section 302BA includes a corporation or a close associate of a corporation who has made a submission to a tender, is a party to a contract, has submitted a grant application or has submitted an application for an approval, license or permit.
1.27The definition of a prohibited gift recipient in new subsection 302BB(1) is a political party that is in government at the time a gift is made.
Examination by other parliamentary committees
1.28The Senate Standing Committee for the Scrutiny of Bills (Scrutiny of Bills Committee) examined the provisions of the bill in its report tabled on 13September 2023. That committee raised potential scrutiny concerns about proposed subsection 302L(3) under principle (i): trespass unduly on personal rights and liberties in relation to significant penalties.
1.29The Parliamentary Joint Committee on Human Rights made no comment on the bill in its report tabled on 18October2023.
1.30However, as stated in the Explanatory memorandum, the bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.