Chapter 2

Background

History

2.1
Australia's present federal political funding and disclosure regime was first legislated in 1983 with the insertion of Part XX into the Commonwealth Electoral Act 1918 (Electoral Act).1
2.2
The Joint Select Committee on Electoral Reform (JSCER), the predecessor to the Joint Standing Committee on Electoral Matters (JSCEM), was instrumental in the introduction of the existing public funding and disclosure arrangements.
2.3
In its 'First Report', tabled in September 1983, the JSCER drew attention to the high cost of elections and public disquiet about the influence of political donations.2 That report made numerous recommendations for reforms concerning public funding and disclosure, which provided for:
a system of public funding for political parties for election purposes;
funding to political candidates who secure a certain amount of votes;
disclosure of sources of funding or services;
candidates and parties to keep and submit records of expenditure on campaigns;
penalties for not adhering to disclosure requirements; and
the establishment of the Australian Electoral Commission (AEC) as an independent statutory authority.3

Legislative changes

2.4
The federal political finance regime has undergone a number of changes since 1984; however, the basic operation of the regime has remained similar. There has been a general movement away from disclosure based mainly on election expenditure to more comprehensive annual disclosure for those involved in the electoral process.
2.5
When it was first introduced, the public funding scheme operated as a reimbursement scheme. Funding was calculated according to the number of formal first preference votes obtained, but was limited to reimbursing political parties, candidates and Senate groups for their actual documented expenditure up to a maximum entitlement.
2.6
In 1995, the public funding scheme was amended4 by the Keating Labor Government such that political parties and candidates were no longer required to lodge a reimbursement claim with the AEC for electoral expenditure. A new direct entitlement scheme was introduced, meaning that public funding would now be based solely on the number of eligible first preference votes received.5
2.7
The Electoral Act was further amended in 20066 by the Howard Coalition Government to increase the prescribed disclosure threshold to 'more than $10,000', indexed annually to the Consumer Price Index (CPI). Prior to these changes, the disclosure threshold had been $200 for candidates, $1,000 for Senate groups, and $1,500 for political parties. The 2006 amendments also introduced the requirement for individuals or organisations who incur political expenditure to lodge an annual return with the AEC.

Electoral Reform Green Paper

2.8
In December 2008, the Rudd Labor Government released the Electoral Reform Green Paper—Donations, Funding and Expenditure (Green Paper). The Green Paper was the first part of a consultation process on electoral law reform, concentrating on donation and disclosure reform as well as the public funding of political parties and possible regulation of campaign expenditure.7
2.9
In introducing the Green Paper, the then Special Minister of State, Senator the Hon John Faulkner, outlined a number of 'new challenges' that Australia's democracy was facing:
Spiralling costs of electioneering have created a campaigning 'arms race'—heightening the danger that fundraising pressures on political parties and candidates will open the door to donations that might attempt to buy access and influence.
New media and new technologies raise questions of whether our legislation and regulation remain appropriate and effective.
'Third party' participants in the electoral process have played an increasing role, influencing the political contest without being subject to the same regulations which apply to political parties, raising concerns about accountability and transparency.
Australia has overlapping electoral systems, regulating different levels of government, creating uncertainty and confusion.8
2.10
As noted in the Green Paper, the Rudd Labor Government had already acted to address some of these issues by introducing the Commonwealth Electoral Amendment (Political Donations and Other Measures) Bill 2008 into the Senate in May 2008. That bill sought to amend the political funding and disclosure provisions of the Electoral Act; including, reducing the disclosure threshold to $1,000, prohibiting the receipt of gifts of foreign property, and limiting public funding to the lesser amount of either actual campaign expenditure or the amount awarded per eligible vote received.
2.11
However, the 2008 bill was not passed by Parliament, and a subsequent bill, the Commonwealth Electoral Amendment (Political Donations and Other Measures) Bill 2009, lapsed at the end of the 42nd Parliament.
2.12
The 2009 version of the bill was reintroduced in the 43rd Parliament as the Commonwealth Electoral Amendment (Political Donations and Other Measures) Bill 2010, but again lapsed in the Senate at the end of that Parliament.

Joint Standing Committee on Electoral Matters (JSCEM)

2.13
Over the past seven years, the JSCEM has conducted several inquiries into issues surrounding political funding and disclosure.
2.14
In November 2011, under the Gillard Labor Government, the JSCEM tabled its Report on the funding of political parties and election campaigns. The report made
30 recommendations, including:
reducing the disclosure threshold on donations to $1,000 and removing CPI indexation;
amending the definition of 'gift' in the Electoral Act to include fundraising events;
the introduction of a six-monthly disclosure reporting timeframe;
imposing a ban on anonymous donations above $50;
requiring political parties to aggregate donations of any value, not just values that exceed the disclosure threshold; and
requiring detailed disclosure of expenditure by political parties and associated entities above the disclosure threshold.9
2.15
In 2012, at the request of the then Special Minister of State, the Hon Gary Gray MP, the JSCEM undertook an inquiry into the AEC's analysis of the Fair Work Australia Report into the Health Services Union. The JSCEM inquiry report contained extensive discussion regarding a list of 17 items that been put forward by the AEC as possible measures to address limitations of Part XX of the Electoral Act.10 The committee did not support all the possible measures, and a dissenting report by Coalition members rejected all but one.
2.16
On 15 October 2015, the Senate referred an inquiry into political donations to the JSCEM; however, the inquiry lapsed with the dissolution of the 44th Parliament.

Foreign donations

2.17
During its inquiry into the conduct of the 2016 federal election, the JSCEM released a second interim report on foreign donations in March 2017. That report recommended that foreign donations to political actors be banned. Additionally, the report recommended banning foreign donations to both political actors who are currently regulated under the Electoral Act and those who are not.11
2.18
In its interim report, the JSCEM highlighted the complexity of political donations more generally and, on 22 August 2017, announced that it would conduct a wider review into political donations and disclosure.12
2.19
The Australian Government expressed its support for the JSCEM's recommendation to ban foreign donations, noting that the 'coalition government believes that it is important that only Australians and Australian entities can participate in our elections'.13

Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017

2.20
On 5 December 2017, the Australian Government announced that it had finalised a comprehensive package of legislative reforms—the 'foreign influence and interference package'—targeting foreign interference and espionage.
2.21
The package is complemented by a bill on electoral reform to ban foreign political donations—the Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017—which was introduced into the Senate on 7 December 2017. Described as 'an important step in protecting the integrity of Australia's electoral system and ensuring that only those with a meaningful connection to Australia can influence local politics'14, the bill responds to the JSCEM's second interim report on foreign donations.
2.22
The Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017 seeks to address potential foreign influence on Australian elections and ban donations from foreign bank accounts, non-citizens and foreign entities. Specifically, the bill proposes to amend the Electoral Act to:
establish public registers for key non-party political actors;
enhance the current financial disclosure scheme by requiring non-financial particulars, such as senior staff and discretionary government benefits, to be reported;
prohibit donations from foreign governments and state-owned enterprises being used to finance public debate;
require wholly political actors to verify that donations over $250 come from an organisation incorporated in Australia, or with its head office or principal place of activity in Australia, or an Australian citizen or Commonwealth elector;
prohibit other regulated political actors from using donations from foreign sources to fund reportable political expenditure;
limit public election funding to demonstrated electoral spending;
modernise the enforcement and compliance regime for political finance regulation; and
enable the Electoral Commissioner to prescribe certain matters by legislative instrument.15
2.23
In anticipation of its introduction, the Minister for Finance, Senator the Hon Mathias Cormann, referred the bill to the JSCEM for inquiry and report on 6 December 2017.
2.24
The JSCEM tabled its 'Advisory report' on the bill on 9 April 2018, noting that it 'agrees in-principle' to the passage of the bill, subject to the Australian Government addressing the 15 recommendations made in the report.16

Other committee activity

2.25
On 3 March 2016, the Senate referred the Commonwealth Electoral Amendment (Political Donations and Other Measures) Bill 2016 to the Senate Finance and Public Administration Legislation Committee for inquiry and report. The inquiry lapsed with the dissolution of the 44th Parliament.
2.26
On 19 April 2016, the matter of Commonwealth legislative provisions relating to oversight of associated entities of political parties was referred to the Senate Finance and Public Administration References Committee for inquiry and report. The final report for the inquiry did not make any recommendations. However, the Committee did comment on the inadequacy of the provisions of the Electoral Act for dealing with associated entities.17

Non-government legislation before Parliament

2.27
The Commonwealth Electoral Amendment (Donation Reform and Transparency) Bill 2016 was introduced into the Senate by the Australian Labor Party in November 2016.18 The bill is substantially similar to that which lapsed at the end of the 43rd Parliament.
2.28
This bill seeks to amend the political funding and disclosure provisions of the Electoral Act to:
reduce the disclosure threshold to $1,000;
prohibit the receipt of a gift of foreign property and all anonymous gifts;
provide that public funding of election campaigning is limited to declared expenditure incurred, or the sum payable calculated on the number of eligible first preference votes received; and
introduce new offences and penalties, and increase penalties for existing offences.19
2.29
Also currently before the Parliament are two bills introduced by the Australian Greens: the Commonwealth Electoral Amendment (Political Donations and Other Measures) Bill 2016, which is similar to those bills introduced by the Australian Labor Party, and the Commonwealth Electoral Amendment (Donations Reform) Bill 2014, which seeks to prohibit political donations from certain industries.

Sources of political party funding

2.30
Political parties raise private funds through a range of means in addition to donations, such as through membership fees, fundraising activities, investments and loans. While donations above the disclosure threshold are required to be fully accounted for by both donors and recipients, specific details of other sources of private funding are not required in either annual or election disclosure returns.
2.31
The Rudd Labor Government's 2008 Green Paper estimated that approximately 80 per cent of the major political parties' funds come from private sources and, of that private funding, approximately 25 percent comes from donations.20

Figure 2.1:  Estimated sources of funding of major political parties

Figure 2.1: Estimated sources of funding of major political parties

Campaign expenditure

2.32
As noted in Chapter 1, in 1995, the public funding scheme under the Electoral Act was amended so that political parties and candidates were no longer required to lodge a reimbursement claim with the AEC for electoral expenditure. Consequently, it is difficult to ascertain the true costs of Australian federal election campaigns, or how this is broken down into specific election costs.
2.33
In its 2011 Report on the funding of political parties and election campaigns, the JSCEM noted that increases in election expenditure 'has been a feature of election campaigning since the introduction of the funding and disclosure scheme in 1984', further commenting that:
While parties once campaigned only in the period immediately prior to an election, they now engage in continuous campaigning between elections, with a significant increase in campaign activity in the year before an election. Increased campaigning activity has been accompanied by an increase in overall amounts of expenditure by political parties and candidates.21
2.34
The JSCEM's recent Advisory report on the Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017 also commented on the changing nature of election campaigning since the relevant provisions were introduced into the Electoral Act:
At the heart of this debate lies the fact that election campaigning today is very different from that in the mid-1980s when relevant provisions in the Electoral Act were written. The campaign period has moved well beyond the time in-between the issuing and return of the election writs. Today, campaigning is continuous and largely issues-based. Campaign messaging is also communicated via a wider range of mediums by a much wider range of entities, including charities, industry groups and religious institutions.22

2016 Australian federal election

2.35
Based on annual disclosure returns lodged with the AEC, Australian political parties reported the following total receipts and expenditure for 2015–16 (Table 2.1). Not all of the amount received is from donations, and not all of the expenditure is
election-related, however the figures give an indication of the scale of amounts involved.23
Table 2.1:  Major political party returns for 2015–16
Political Party
Total amount received ($)
Total expenditure ($)
Liberals and Nationals
95,826,360
78,014,006
Australian Labor Party
60,973,958
49,136,883
Australian Greens
15,914,547
14,502,922
Liberal Democratic Party
817,687
1,503,737
Nick Xenophon Team
1,103,317
678,791
Family First
439,012
453,048
Katter's Australian Party
555,412
499,612
Pauline Hanson's One Nation
333,198
294,870
Derryn Hinch's Justice Party
105,409
173,687
Jacqui Lambie Network
121,793
85,215
All others
11,861,420
10,779,236
Total
188,052,113
156,122,007
Source: Compiled by the Parliamentary Library from AEC data
2.36
A total of almost $62.8 million of public funding—$2.63 for each eligible first preference vote—was paid to political parties and candidates as a result of the 2016 federal election (Table 2.2).24 Of the total amount of public funding, 75 per cent of this (approximately $47.4 million) was paid to the Liberal Party of Australia and Australian Labor Party.25
Table 2.2:  Public funding to political parties for the 2016 federal election26
Political party
Total payment ($)
Per cent of total payment
Liberal Party of Australia
24,203,154.00
38.55
Australian Labor Party
23,191,686.57
36.94
Australian Greens
6,717,055.98
10.70
National Party of Australia
3,261,589.61
5.20
Pauline Hanson's One Nation
1,745,369.28
2.78
Nick Xenophon Team
1,245,236.15
1.98
Derryn Hinch's Justice Party
581,186.24
0.93
Family First
222,940.69
0.36
Katter's Australian Party
159,346.96
0.25
Jacqui Lambie Network
73,963.18
0.12
Liberal Democratic Party
49,174.77
0.08
All others (incl. Independents)
1,327,571.60
2.11
Total
62,778,275.03
100

Push for reform

2.37
Despite considerable community debate and media coverage in recent years, Australia's federal political funding and disclosure regime has undergone no substantial changes since 2006.
2.38
The AEC highlighted some of the issues that are regularly raised in the ongoing public commentary relating to political funding and disclosure, including:
the timeliness of annual and election disclosure by political parties and other participants in the electoral process;
the value of the disclosure threshold;
the clarity of definitions relating to disclosure, such as what constitutes a 'gift';
the lack of harmonisation between state and territory disclosure schemes;
the definition of associated entities and third parties under the Electoral Act, and how this affects the application of disclosure obligations;
the absence of restrictions on foreign donations;
the practice of 'donation splitting' by political parties; and
the sanctions and penalties for incomplete or non-disclosure.27

  • 1
    Part XX of the Electoral Act was inserted by the Commonwealth Electoral Legislation Amendment Act 1983 and commenced on 21 February 1984.
  • 2
    Joint Select Committee on Electoral Reform, First Report, September 1983, p. 153.
  • 3
    Joint Select Committee on Electoral Reform, First Report, September 1983, pp. 215–221.
  • 4
    See Commonwealth Electoral Amendment Act 1995.
  • 5
    The Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017, introduced by the Australian Government into the Senate on 7 December 2017, proposes to amend the Electoral Act to cap public funding to demonstrated electoral expenditure.
  • 6
    See Electoral and Referendum Amendment (Electoral Integrity and Other Measures) Act 2006.
  • 7
    Australian Government, Electoral Reform Green Paper—Donations, Funding and Expenditure, December 2008, p. 2.
  • 8
    Australian Government, Electoral Reform Green Paper—Donations, Funding and Expenditure, December 2008, p. 1.
  • 9
    Joint Standing Committee on Electoral Matters, Report on the funding of political parties and election campaigns, November 2011, pp. xxvii–xxxiii.
  • 10
    Joint Standing Committee on Electoral Matters, Review of the AEC analysis of the FWA Report on the HSU, September 2012, pp. 41–104.
  • 11
    Joint Standing Committee on Electoral Matters, Second interim report on the inquiry into the conduct of the 2016 federal election: Foreign Donations, March 2017, pp. ix, 39–40.
  • 12
    Joint Standing Committee on Electoral Matters, Review of political donations commences, Media Release, 22 August 2017.
  • 13
    See Senator the Hon James McGrath, Assistant Minister to the Prime Minister, Senate Hansard,
    20 June 2017, p. 4361.
  • 14
    The Hon Malcom Turnbull MP, Prime Minister of Australia, Protecting Australia from foreign interference, Media Release, 5 December 2017.
  • 15
    Explanatory Memorandum, Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017, pp. 3–4.
  • 16
    Joint Standing Committee on Electoral Matters, Advisory report on the Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017, April 2018, p. iii.
  • 17
    Finance and Public Administration References Committee, Commonwealth legislative provisions relating to oversight of associated entities of political parties—Final Report, May 2016, p. 25.
  • 18
    The bill was also introduced into the House of Representatives in February 2017 as the Commonwealth Electoral Amendment (Donation Reform and Transparency) Bill 2017. However, in accordance with Standing Order 42, was removed from the Notice Paper on 5 September 2017.
  • 19
    Explanatory Memorandum, Commonwealth Electoral Amendment (Donation Reform and Transparency) Bill 2016, [p. 2].
  • 20
    Australian Government, Electoral Reform Green Paper—Donations, Funding and Expenditure, December 2008, p. 41.
  • 21
    Joint Standing Committee on Electoral Matters, Report on the funding of political parties and election campaigns, November 2011, p. 91.
  • 22
    Joint Standing Committee on Electoral Matters, Advisory report on the Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017, April 2018, p. iii.
  • 23
    Parliamentary Library, Election funding and disclosure in Australia: a quick guide to recent reforms and current issues, July 2017, p. 5.
  • 24
    Australian Electoral Commission, Final 2016 federal election payment to political parties and candidates, Media Release, 17 August 2016, available at: http://www.aec.gov.au/media/media-releases/2016/08-17e.htm
  • 25
    Parliamentary Library, Election funding and disclosure in Australia: a quick guide to recent reforms and current issues, July 2017, p. 5.
  • 26
    Australian Electoral Commission, Final 2016 federal election payment to political parties and candidates, Media Release, 17 August 2016.
  • 27
    Australian Electoral Commission, Submission 2—Attachment 1, pp. 7–10.

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