On 17 August 2017, the Senate established the Select Committee into the Political Influence of Donations to inquire into and report, on 15 November 2017, on the following matters:
the level of influence that political donations exert over the public policy decisions of political parties, Members of Parliament and Government administration;
the motivations and reasons why entities give donations to political parties and political candidates;
the use of shell companies, trusts and other vehicles to obscure the original source of political donations;
how to improve the integrity of political decision-making through our political donations regime and the public funding of elections;
any other related matters.
The reporting date for the inquiry was extended on a number of occasions—initially to 7 December 2017 on 7 September 2017; to the last sitting day in March 2018 on 27 November 2017; to 10 May on 28 March 2018; and finally to 6 June 2018 on 10 May 2018.
Conduct of the inquiry
The committee advertised the inquiry on its website and wrote to a number of individuals and organisations, inviting submissions by 9 October 2017. The committee continued to accept submissions after this date. In response, the committee received 36 submissions, as well as additional information and answers to questions on notice, which are listed at Appendix 1.
The committee held three public hearings for the inquiry. Public hearings were held on 2 November 2017 in Melbourne, 6 November 2017 in Canberra, and
30 January 2018 in Sydney. The witnesses who appeared before the committee are listed at Appendix 2.
References to the Committee Hansard are to the Proof Hansard. Page numbers may vary between the Proof and Official Hansard transcripts.
The committee thanks all the individuals and organisations who made submissions and who gave evidence to assist the committee with its inquiry.
Structure of the report
The report comprises six chapters, including this introductory chapter:
Chapter 2 provides an overview of the history behind the federal political funding and disclosure regime.
Chapter 3 discusses the risk of corruption through undue influence that is posed by donations under the current federal political finance regime. Examples of patterns of donations suggesting undue influence are also examined, as well as the nature, motivations and reasons behind political donations from large corporate interests.
Chapter 4 explores the options for regulating third parties in relation to their political activity and associated expenditure.
Chapter 5 examines in detail the significant barriers to transparency of the current political funding and disclosure regime.
Chapter 6 explores proposed reform measures to the political finance regime to safeguard the integrity of political decision-making.
There are various categories of participants in the political process with regard to funding and disclosure, as defined by the Commonwealth Electoral Act 1918 (Electoral Act). These are outlined below.
A 'political party' is an organisation with the object or activity of promoting a candidate or candidates to the House of Representatives or the Senate. A 'registered political party' is a political party with at least one member in the Commonwealth Parliament or 500 members, and is registered under Part XI of the Electoral Act.
Candidates and Senate groups
A 'candidate' is an Australian citizen over 18 years of age who is nominated for election.
'Senate groups' consist of two or more candidates for a Senate election that have made a joint request that their names be grouped on the ballot papers.
A political 'donor' is a person or organisation who makes a donation to:
a registered political party or the State branch of a registered political party;
any person or body with the intention of benefiting a particular registered political party or the State branch of a registered political party; or
a candidate or a member of a Senate group during the disclosure period in relation to an election.
An 'associated entity' is defined under section 287 of the Electoral Act as an entity:
that is controlled by one or more registered political parties; or
that operates wholly, or to a significant extent, for the benefit of one or more registered political parties; or
that is a financial member of a registered political party; or
on whose behalf another person is a financial member of a registered political party; or
that has voting rights in a registered political party; or
on whose behalf another person has voting rights in a registered political party.
Examples of associated entities include '500 clubs', 'think tanks', registered clubs, service companies, trade unions and corporate party members.
Presently, the Electoral Act does not explicitly define third parties. However, the Electoral Act requires that individuals or organisations that incur 'political expenditure' above the disclosure threshold lodge an annual return with the Australian Electoral Commission (AEC).
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.
The committee notes that subparagraph 314AEB(1)(a)(ii) of the Electoral Act was amended in March 2018 with the commencement of the Electoral and Other Legislation Amendment Act 2017. The subparagraph had previously read 'the public expression of views on an issue in an election by any means'. As outlined in the Explanatory Memorandum for the bill, this amendment was intended to clarify that in order to give rise to the need for an annual return, the public expression of views must relate to an upcoming election rather than a past election.
Current federal regulation
Australia's federal political funding and disclosure regime is established under
Part XX of the Electoral Act. The regime consists of two main components:
a financial disclosure scheme that requires candidates, registered political parties, their state and territory branches, associated entities, donors and third parties to lodge annual or election period returns with the AEC; and
a public funding scheme of political candidates and Senate groups that obtain at least four per cent of the formal first preference vote in the electoral division or the state or territory they contested.
The original intention behind the federal political funding and disclosure regime was twofold: the provision of public funding to reduce the reliance of political parties and candidates on private funding, such as donations; and to increase overall transparency and inform the public about the financial dealings of political parties, candidates and other participants in the electoral process.
The public funding and disclosure schemes that comprise the current regime were explicitly linked to one another when the regime was first legislated by an amendment to the Electoral Act in 1983. In his second reading speech, the then Special Minister of State, the Hon Kim Beazley MP, stated that:
An essential corollary of public funding is disclosure. They are two sides of the same coin. Unless there is disclosure the whole point of public funding is destroyed.
Disclosure of certain information, such as details of 'gifts' and donations, is subject to a minimum threshold below which disclosure is not required. The prescribed disclosure threshold is indexed annually to the Consumer Price Index (CPI). The disclosure threshold for the period of 1 July 2017 to 30 June 2018 is $13,500.
A 'gift' is defined under the Electoral Act as:
…any disposition of property made by a person to another person, otherwise than by will, being a disposition made without consideration in money or money’s worth or with inadequate consideration, and includes the provision of a service (other than volunteer labour) for no consideration or for inadequate consideration, but does not include:
a payment under Division 3; or
an annual subscription paid to a political party, to a State branch of a political party or to a division of a State branch of a political party by a person in respect of the person’s membership of the party, branch or division.
The current funding and disclosure regime prevents the receipt of anonymous donations above the disclosure threshold, but does not otherwise limit the amount of donations that can be received, nor does it place any limits on election expenditure or the industries able to make donations. Additionally, the Electoral Act does not currently restrict foreign citizens or corporations from making political donations.
Registered political parties and associated entities must lodge annual disclosure returns for the previous financial year with the AEC by 20 October each year. For the purposes of disclosure, organised state or territory branches of registered political parties are treated as being separate to the registered party and must complete their own annual return.
Annual disclosure returns for political parties and associated entities must show the total value of receipts, payments and debts, as well as details of any individual receipts (monetary and non-monetary) that exceed the disclosure threshold.
Donors and third parties who incur political expenditure (see paragraph 1.16) above the disclosure threshold are also required to lodge an annual return with the AEC. Donor and third party annual returns must be lodged by 17 November each year.
For donors, details of donations made to a political party, including gifts-in-kind, are aggregated for the purpose of annual returns. That is, if the total of donations made to one political party exceeds the disclosure threshold, all donations to that political party, regardless of their value, must be disclosed.
In the case of third parties, where a person or organisation has incurred expenditure more than the disclosure threshold for one or more of the five categories of political expenditure (see paragraph 1.16), the person or organisation must disclose the amount of political expenditure incurred for each category. Expenditure for purposes other than these categories is not political expenditure as defined by the Electoral Act and does not need to be reported.
Annual disclosure returns are made available for public inspection on the AEC website from the first working day in the following February.
Political candidates and Senate groups are required to lodge election disclosure returns with the AEC before the expiration of 15 weeks after election day. Election returns must show the total value of donations and number of donors, details of individual donations received above the disclosure threshold, and total electoral expenditure incurred between the issue of the writ and election day. Individuals or organisations who have made political donations in excess of the disclosure threshold must also lodge election returns.
Election returns are published on the AEC website 24 weeks after election day.
Role of the Australian Electoral Commission
The AEC is funded to deliver one key outcome:
Maintain an impartial and independent electoral system for eligible voters through active electoral roll management, efficient delivery of polling services, and targeted education and public awareness programs.
The AEC administers the political funding and disclosure regime in accordance with the requirements in Part XX of the Electoral Act.
Public funding scheme
By reducing reliance on private funding, the introduction of a public funding scheme aimed to 'level the playing field' and reduce the potential for corruption and undue influence on the electoral process.
As previously noted, a candidate or Senate group is eligible for public funding if they obtain at least four per cent of the formal first preference vote in the electoral division or the state or territory they contested. Under the current regime, public funding operates as a direct entitlement scheme; that is, candidates and Senate groups receive public funding based solely on the number of first preference votes they obtain and are not required to demonstrate matching campaign expenditure.
The amount of public funding payable is calculated by multiplying the number of first preference votes received by the applicable funding rate, which is indexed every six months in line with CPI. The funding rate for the six months from 1 January 2018 to 30 June 2018 is $2.70 for each eligible formal first preference vote received.
State and territory regulation
Under Australia's federal system of government, political funding and disclosure schemes operate not only at a Commonwealth level, but also at a state and territory level.
The various state and territory schemes that apply to elections and related activities within their relative jurisdictions are broadly similar to the federal regime in terms of their objectives and approach. However, some quite significant differences have evolved between the states and territories in response to local factors, particularly with regard to disclosure thresholds and the degree of regulation involved.
A number of initiatives to improve political funding and disclosure regulations have been undertaken at the state level; in particular, significant reforms have been implemented in New South Wales (NSW) and Queensland. NSW is generally considered to have the most comprehensive and stringent regulations of any state or territory.
In September 2017, the Victorian Labor Government announced that it would introduce legislative reforms to give the state the 'strictest and most transparent political donation laws in Australia'. The proposed reforms include:
capping donations at $4,000 over a four-year parliamentary term;
reducing the disclosure limit from $13,500 to $1,000 per financial year; and
banning foreign donations.
The Northern Territory Labor Government has also announced steps toward reforming its political funding and donations arrangements, establishing an inquiry into political donations in December 2016. The Hon Justice John Mansfield AM was appointed as Commissioner of the inquiry in June 2017.
Issues posed by inconsistencies between the various state and territory and Commonwealth political finance regimes are discussed in Chapter 6.