Beyond the principal actors in political campaigns, third party organisations are integral to the political process, providing important context and commentary on the issues being decided on in an election.
Some third parties have also played an infamous role in recent corruption investigations, such as Operation Spicer in New South Wales (NSW), where the Independent Commission Against Corruption (ICAC) inquiry uncovered extensive evidence of illegal donations being channelled through third parties to circumvent electoral laws.
However, not all third parties are the same. There is range of entities that come under the broad definition of a third party, some of which are for profit organisations which have a specific political motivation, while others, such as charities, engage in the political sphere peripheral to their core function. The committee heard evidence that these differences should be reflected in the regulatory burden placed on them.
Submissions to various parliamentary inquiries by Professor Joo-Cheong Tham discuss the fundamental differences between political entities and third parties, and justify why they should be regulated differently:
Political parties (or more accurately, their candidates) stand for office but not third parties;
Political parties are wholly political organisations whereas third parties tend not to be;
Political parties tend to rely upon donations to fund their campaigns whereas third parties have more varied sources of income;
The campaigns of political parties are invariably electoral campaigns (campaigns directly aimed at influencing voters and electoral outcomes) whereas third parties tend to engage in electoral and non-electoral campaigns;
The electoral campaigns of political parties tend to be based on express party and candidate advocacy whereas the electoral campaigns of third parties tend not to take such a character, but rather comprise provision of electoral information and/or issue advocacy; and
Because of their multiple organisational purposes, varied sources of income, and the fluid and multi-dimensional character of their campaigns, third parties tend to face a more acute challenge of identifying which funds and spending are regulated by political funding laws.
Professor Tham concluded that regulating third parties similar to political parties would be 'unfair to third parties that do not have a meaningful impact upon politics and especially elections, and also unduly burden political freedoms as the regulatory burden on less-resourced organisations might result in a "chilling" effect on political engagement.'
This view was shared by the Australian Conservation Foundation (ACF), who distinguished between politicians and political parties and third parties in relation the level of risk of corruption and its potential impact:
[P]oliticians and political parties represent a much higher corruption risk than third parties. Third parties can only advocate for government (or voters) to take particular action. Politicians themselves stand to end up in positions where they control the levers of power. As such, the most urgent priority for reform of the Electoral Act should be placing appropriate restrictions on politicians and political parties. Overall, third parties should be subject to less stringent requirements, because the level of risk of corruption is also less.
Current third party regulation
As discussed in Chapter 1, presently, the Electoral Act does not explicitly define third parties. However, the Australian Electoral Commission (AEC) defines third parties as people or organisations (other than registered political parties, candidates and federal government agencies) that incur 'political expenditure' as defined in the Commonwealth Electoral Act 1918 (Electoral Act).
Subsection 314AEB(1) of the Electoral Act specifies those types of political expenditure which require an individual or organisation to provide an annual return to the AEC. Political expenditure is expenditure incurred by a person or organisation, by or with their authority, on:
the public expression of views on a political party, a candidate in an election or a member of the House of Representatives or the Senate by any means;
the public expression of views on an issue that is, or is likely to be, before electors in an election (whether or not a writ has been issued for the election) by any means;
the communicating of any electoral matter (not being matter referred to in subparagraph (i) or (ii)) for which particulars are required to be notified under section 321D;
the broadcast of political matter (not being matter referred to in subparagraph (iii)) in relation to which particulars are required to be announced under subclause 4(2) of Schedule 2 to the Broadcasting Services Act 1992;
the carrying out of an opinion poll, or other research, relating to an election (whether or not a writ has been issued for the election) or the voting intentions of electors.
Third parties are covered by the Electoral Act requirement that individuals or organisations that incur 'political expenditure' above the disclosure threshold lodge an annual return with the AEC. The return must be lodged within 20 weeks of the end of the preceding financial year.
Third parties are also required to disclose gifts/donations over the threshold, where they have been used to incur political expenditure.
The committee heard from a number of contributors that the regulation of third parties under the current system is insufficient to prevent serious distortion of election or other political campaigns.
The Community Council for Australia (CCA) suggested that the current system rewards those who can spend the most in election, rather than any merit based approach to policies:
It appears to CCA that the current laws encourage all political parties to spend as much as they possibly can to win elections—the more spent the more likely parties can properly segment the market and target accordingly. E.g. a politician who can survey every voter in their electorate and directly or indirectly segment the market might then be able to produce fifteen different fliers, each targeting issues that they know are important to a particular part of their electorate, and have those fliers selectively distributed to the appropriate target group of voters. They may even have the resources to test each of their separate messages and employ people to call voters individually. This targeted approach is more likely to resonate with voters than a politician who can only afford to produce one flier and relies on mass distribution of this single flier.
St Vincent de Paul Society National Council (St Vincent de Paul) commented on the change made by the Electoral and Other Legislation Amendment Act 2017 (see paragraph 1.17) to the scope of activity which would prompt an obligation to report. In their response to the committee's request for further information on third parties, the organisation said:
[O]ne of the consequences appears to be that the number of community organisations, including charities, who will have to submit an annual Third Party Return of Political Expenditure will be greatly expanded. This is because the new wording includes not only issues that are before electors in an election, but also issues that are likely to be before electors.
St Vincent de Paul also contended that broadening the activity covered for reporting purposes will now encompass the day-to-day work of organisations and charities not previously covered, and for no real benefit:
For example, organisations that regularly make submissions to Federal Government inquiries will probably need to submit a return, because in order to make high quality submissions, organisations generally employ policy officers to research and coordinate responses. It does not take long to exceed the $13,500 threshold. More broadly, any organisation that campaigns on an issue for a length of time will find that it needs to submit a return.
While the Third Party Return of Political Expenditure is not a particularly onerous document, it is a waste of time for the more than 1,000 charitable and not for profit organisations to be filling it out. It serves no real purpose and no meaningful or useful information will be gained.
The Australian Council for International Development (ACFID) submitted that the recent change created a 'broad and ambiguous definition' of political expenditure which will severely impact public democratic engagement:
We are concerned that the current (updated March 2018) AEC regulations governing political expenditure, and the proposed Electoral Funding and Disclosure Reform Bill currently before Parliament, may have a chilling effect on legitimate and constructive advocacy and public debate, severely undermining Australia’s open and democratic system of government—which we believe should encourage, not restrict, public engagement.
Options for increased regulation
As with its consideration of regulation for other actors in the political sphere, the committee received various contributions on third parties how should be regulated. Much of the evidence is of the view that any further regulation should reflect the role that third parties play in the political system, which is intrinsically different to parties, candidates and associated entities.
CCA suggested that a level playing field should be aspired to through the capping of political expenditure, while ACF had the following suggestions for any regulation of third parties:
The definition of ‘political expenditure’ should seek to capture expenditure that is intended to affect electoral contests, not expenditure for campaigning promoting an issue in the general sense.
There should be finite and set period when the relevant disclosures and caps apply to third parties (e.g. three-six months out from polling day, rather than year around).
It is crucial that clarity is provided around what is included and excluded from political expenditure (i.e. staff and office costs should be excluded for third parties).
For donation disclosures and caps, only donations made with the intention (of the donor) to be spent on ‘political expenditure’ should be captured. When there is no nexus between a ‘gift’ and ‘political expenditure’, that gift should fall outside the regime. Philanthropic donations (that are a tax deductible ‘gift’ under Division 30 of the Income Tax Assessment Act 1997) to third parties should not be captured, unless such a donation is given to a third party specifically to be directed to political expenditure.
Only third parties that incur significant political expenditure should be regulated. If the ‘political expenditure’ of a third party exceeds $100,000 per annum, the third party should be subject to the coverage under the Act.
Professor Tham's 'Ten Point Plan' includes a number of proposals specific to third parties. However, his suggestions are predicated on third parties only being subject to regulation if they incur political expenditure over $100,000. The three central elements which would apply to third parties, as well as all other political actors are:
Effective transparency of political funding
Comprehensive: i) low disclosure threshold with amounts under threshold aggregated; ii) covers key political actors (including third parties).
Caps on election spending
Comprehensive: i) cover all ‘electoral expenditure’; ii) covers key political actors (including third parties).
Applies two years after previous election—allow limits to apply around six months.
Two types of limits: i) national; ii) electorate.
Level set through review and harmonised with levels of caps and public funding.
Caps on political donations
Comprehensive: i) cover all ‘political donations; ii) covers key political actors (including third parties).
Gradually phase in to set cap at $2,000 per annum and private funding around 50 per cent of total party funding.
Exemption for party membership (including organisational membership fees) with level at $200 per member (like section 96D of Election Funding, Expenditure and Disclosures Act 1981 (NSW))
Associate Professor Luke Beck argued against any attempt to cap political expenditure on constitutional grounds. He cites the Unions v New South Wales (2013) 304 ALR 266 case whereby the High held that legislation capping political expenditure by political parties did not serve a legitimate purpose, and contends that 'for the same reasons, capping political expenditure by third party campaigners for no particular reason would also be unconstitutional.'
Expenditure caps for third parties
Some participants stressed the importance of expenditure cap regulations applying to all political actors, including third parties. It was argued that not extending expenditure caps to third parties would risk election spending being transferred to these entities.
Professor Tham's submission articulated this issue:
Alongside election spending limits being applied to political parties and candidates, there should also be limits on third party election spending. The first reason lies with preserving the integrity of the limits applied on parties and candidates. Without third party limits, political parties and candidates may be able to use front groups to engage in spending otherwise prohibited if they had done so directly.
Similarly, Dr Livingstone told the committee that 'I think it's important that any system of regulation doesn't just transfer the problem of money going to political parties'. Dr Livingstone further contended that '[i]f you want to contribute to public debate, that's fine, but you should be subject to some reasonable regulation when you do it'.
While supportive of extending limits on campaign spending to third parties, representatives from GetUp warned the committee that expenditure caps should not restrict the legitimate role of third parties to engage in elections:
…we've got to be really careful that those expenditure caps aren't used to diminish the important role that third parties play in advocacy, including at election times.
Professor Tham also acknowledged that expenditure caps on third parties would need to account for the varied nature of third party organisations:
…the regulations that should apply to third parties are not necessarily the same as the regulations that should apply to political parties and candidates. Whatever regulations develop in the area need to be sensitive to the fact that third parties come in very different shapes and sizes and are, organisationally, quite different from political parties.
Third parties and foreign donations
There was some disagreement among participants as to whether a ban on foreign donations should extend to third parties.
Representatives from GetUp argued that a ban on foreign donations should not apply to third parties as donations made to such groups do not have a direct influence on government decision-making:
That's correct because the purpose of a foreign donation traditionally is to make sure that outside influences can't be placed on those people who have their hands on the ink strokes of government who can change laws, direct our military and so forth, which people outside the parliamentary system cannot do.
Dr Ng submitted that banning foreign donations to third parties could be found to be unconstitutional due to the 'tenuous link between such groups and foreign influence on domestic policy, compared to political parties who are elected to government'.
Dr Tham advised the committee that 'my general position is that if there is any regulatory measure that applies to political parties and candidates it should also apply to third-party activity', however qualified that such measures should give 'due regard to the different organisational character of third parties'.
When questioned by the committee about whether regulations relating to foreign donations should extend to third parties, Dr Livingstone expressed the view that:
…prohibitions on third-party donors, or third-party polemicists, if I can put it that way, should be generous and reasonable, but set at a level where the capacity to influence public debate is not exceptional. A mining industry campaign that costs $20 million, for example, to my view, is influencing the public debate rather more than is reasonable in a robust democracy. I think the cap on policy advertising and advocacy should be higher of course than for individual donors but not set at a ridiculously higher level. So it should reflect the cost of getting your message out there, but not allowed domination of the airwaves, so to speak.
Should all thirds parties be regulated the same?
Associate Professor Beck is of the view that it is political activity that should be regulated, rather than the third parties themselves. According to his submission, this approach has a twofold benefit:
…political activity should be regulated and any differentiation in treatment should principally be a result of the amount of money involved. The focus on political activity ensures that any regulation targets the perceived mischief, which will reduce the chances of a successful constitutional challenge on the ground of disproportionate burdens on political communication.
Professor Tham sought to distinguish between third parties by defining an entity in terms of its political expenditure. In his submission to the inquiry of the Joint Standing Committee on Electoral Matters into the Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017, Professor Tham proposed that a person or an organisation with political expenditure above $100,000 should be required to register as a 'third party campaigner', whereas a person or an organisation with expenditure above $2,000,000 should be required to register as a 'political campaigner'.
The committee received consistent evidence over the course of the inquiry that the recently amended legislation and current legislative proposals before parliament carry the very real danger of stifling the voice of third parties in the delivery of their core purpose to advocate on specific issues. The committee is of the strong view that only activity by third parties that is seeking to directly influence elections should be regulated.
In relation to caps on donations and campaign expenditure, the committee heard views from many key stakeholders of the potentially corrosive impact of significant spending by third parties during election campaigns. Recent examples in Tasmania show how excessive and unregulated political expenditure can influence voters and materially affect the outcome of an election.
However, the committee is also aware that third parties themselves are very difficult to categorise, as is the type of activities they may engage in, political or otherwise. The committee therefore recommends that a thorough consultation exercise be carried out by the federal government before any detailed regulatory mechanisms are put in place.
In recognition that expenditure caps on political parties and associated entities would likely divert donations into third parties, the committee recommends that the Australian Government ensure that any mechanism to limit third party expenditure would enable continued democratic participation and advocacy, while removing any unfair advantage that can be enjoyed by interest groups with the largest financial resources.
Charities as third party organisations
In Australia, a 'charity' is defined under the Charities Act 2013 (Charities Act). To be recognised as a charity, an organisation must:
have only charitable purposes that are for the public benefit;
not have a disqualifying purpose; and
not be an individual, a political party or a government entity.
Australian charities are regulated by the Australian Charities and Not-for-profits Commission (ACNC). The ACNC is established under the Australian Charities and Not-for-profits Commission Act 2012 (ACNC Act). As part of its regulatory role, the ACNC registers charities, monitors compliance and manages non-compliance of registered charities with their obligations and responsibilities under the ACNC Act.
To maintain their status as a charity in accordance with the definition under the Charities Act, a charity is not permitted to engage in activities for 'the purpose of promoting or opposing a political party or candidate for political office'. Consequently, charities cannot make donations to or advocate directly for a political party or candidate.
Mr David Crosbie, CEO of the Community Council for Australia (CCA), highlighted these restrictions on registered charities with regard to political activities in his evidence to the committee:
CHAIR: …Just to be clear: the act that governs charities prevents you from making donations to any political party?
Mr Crosbie: That would mean that you were acting as a political party or in support of a political party, and you can't do that as a charitable organisation. The 2013 definition of 'charity' excludes political activity.
CHAIR: It also prevents you from advocating directly for one political party or another?
Mr Crosbie: You cannot tell people to vote for a political party. You cannot tell people to provide how-to-vote cards.
CCA further submitted that charities are already under a substantial regulatory burden and should be considered separately in any regulation of political actors:
CCA believe charities are in a separate category in relation to political influence primarily because all charities have to demonstrate a public benefit as well as satisfying a range of legal and regulatory requirements to establish and maintain their charitable status.
Impact of political finance reform on the charity sector
A number of inquiry participants cautioned the committee about the potential impact of proposed changes to the operation of the federal political finance regime with regard to charities in Australia.
The Australian Council of Social Service (ACOSS) promoted the unique role charities and not-for-profits have in Australia. In response to proposed legislative changes to regulate the activity of charities, they commented:
Charities and not-for-profits have a special place in the civic life of the nation. They speak for and with some of the most disadvantaged people and communities, and have played a leading role in the development of some of the rights, laws and policies that we take for granted today. Whether it is campaigning for people experiencing homelessness, mental health, women’s rights or environmental justice, charities and not-for-profits play a key role in important debates and ensure that often marginalised voices are heard. It is vital for a vibrant civil society that additional red tape not stand in the way of charities and not for profits speaking out on issues that affect us all.
Similarly, representatives from ACF implored the committee to consider the effect that reforms could have on the important advocacy role of charities:
The only thing that I would want the committee to look seriously at is not muzzling advocacy in Australia. Advocacy is lawful and very, very important for the future of all Australians. We wouldn't want to cap it to the extent that we are impacting advocacy.
When questioned by the committee about the CCA's position on proposals to limit or constrain the advocacy work of charities, Mr Crosbie commented:
It's bizarre. I don't know why anyone who is committed to having the strongest possible country and the strongest possible communities would seek to silence the voice of communities. And the most important input into national policy is often input from the community itself and the communities impacted by that policy.
I think that would be very damaging to Australia, and I fail to see that there is any justification of any kind.
Ms Kelly O'Shanassy, CEO of ACF, reflected on how measures to reform political funding and disclosure regulation at the state and territory level have resulted in negative outcomes for the charity sector. Ms O'Shanassy warned that 'conflating donation management for charities with donations to political parties, candidates or associated entities has resulted and is right now in this country resulting in perverse outcomes'.
Ms O'Shanassy drew the committee's attention to recent political finance reforms in Queensland and the impact this will have on advocacy-based charity organisations:
I'll run you through the Queensland example—it requires the disclosure of donations and donors over $1,000 over a disclosure period, which is the election period, for expenditure on an electoral matter. The problem is the definition of 'an electoral matter', which is defined as 'an issue that may be before an election'. Advocacy based charity organisations who want, in our case, to create healthy rivers and clean air must work with governments because governments set the policy and the rules that determine the health of the environment, so every issue that we work on could potentially be an electoral matter. That means that we have to disclose every single donor over $1,000 over four years, which is around 7,000 people, none of whom have ever given us money to work on a Queensland election, because we haven't worked on a Queensland election for some time. We are planning to work on the next one. It's a nonsensical requirement that is impossible for us to implement and is actually giving misleading information, because it's saying that these people gave to us for an election, which is clearly not the case.
Providing a further example, Ms O'Shanassy highlighted the proposed reforms to political finance laws in Victoria, arguing that such measures, if passed, would 'kill off advocacy based charities' that work in Victoria:
We mentioned earlier that in Victoria they're looking at putting caps on political donations. If they use the same definition as Queensland, not only would we have to disclose donors who give us up to $1,000 over four years, but we wouldn't be able to get any higher donation than $1,000 over four years, which would kill off advocacy based charities in Australia that work in Victoria. We cannot simply conflate donations to charities with donations to political parties without looking very carefully at the impact.
Adequacy of current charity regulation
Some inquiry participants noted the stringent regulation that already applies to the charity sector in Australia, including in relation to political activity, and argued that imposing further regulation on charities as part of political finance reforms is unnecessary.
For example, Mr Crosbie told the committee that:
I think the restrictions on charities are being enforced with a high level of diligence. Whether or not that kind of diligence would ever be imposed on any other group is very questionable. The fact is the charity sector have welcomed that level of accountability, because we trade in trust. Charities rely on trust and transparency with their communities in order to receive their income and continue to do their work.
Similarly, Ms O'Shanassy told the committee that 'charities are very heavily regulated in this country', further commenting that:
The charitable sector has clear governance regulation and law in this country such that we cannot be in any way partisan. We can try to influence a policy outcome, which is done through political parties, of course. But we would like all parties to adopt our policies, because we understand, based on the evidence, they are the best thing for the interests of Australians, which is why we'll advocate very strongly. And as I said, not letting the perfect get in the way of the good, the charitable sector is not causing problems in corruption in this country. So, we don't need to really conflate those two issues and we are already heavily regulated and managed.
St Vincent de Paul were vehement in their response on the adequacy of current regulation on charities in terms of their political activities:
In this context, it should be noted that the Charities Act 2013, while recognising public policy advocacy in furtherance of a charity’s purpose is legitimate, prohibits charities from having a 'purpose of promoting or opposing a political party or candidate for political office.' Given there is already this prohibition and regulation by the ACNC, no further requirements are necessary for charities and there is therefore little justification for the imposition of additional requirements under the Commonwealth Electoral Act 1918.
In relation to the recent legislative changes, St Vincent de Paul argued that work on many of their purposes would now be considered 'political expenditure', and quoted the confirmation of this by the ACNC:
The changes to the Commonwealth Electoral Act 1918, however, introduce additional administrative burdens and legal ambiguities that ultimately serve to undermine the independence of charities, and muddle important regulatory distinctions between activities and purpose, as spelt out in charity law and case law.
Importantly, because of the changes to the Commonwealth Electoral Act 1918 made in September 2017, expenditure on these purposes will now largely be defined as political expenditure, and this will have the immediate effect of increasing administrative burden. The ACNC has summed up the situation succinctly, 'Under the new definition (of political purpose which came into effect in March 2018) it is likely that more charities will be required to report to the AEC and the Bill (the Electoral Funding and Disclosure Reform Bill 2017) also increases the regulatory requirements for each individual charity engaged in political expenditure over the threshold amount.'
The committee heard almost universal views that the extensive regulatory regime that governs the operation of charities effectively makes any recent legislative proposals under electoral law redundant. The activities charities are able to undertake under the purview of the Australian Charities and Not-for-profits Commission are strictly governed and do not allow charities to promote or oppose a political party or candidate. The committee therefore sees no justification for imposing a further regulatory burden on charities.