The Government's introduction of the National Anti-Corruption Commission (NACC) legislation has led to discussion about the potential for political donations (particularly large donations) to have a corrupting influence. This is occurring in the context of a federal parliamentary committee inquiry into the 2022 election and two state anti-corruption agencies’ recent comments on links between political finance rules and corruption.

In comments to the media, Attorney-General Mark Dreyfus stated that while the NACC 'will have the power to investigate any third party who is seeking to adversely influence the carrying out of a public function', political donations would not necessarily fall under the remit of the NACC because 'donations to political parties in Australia are lawful' and regulated. Mr Dreyfus further noted that the Government was 'going to lower the disclosure threshold because we want there to be more transparency in donations'.

The Terms of Reference for the Joint Standing Committee on Electoral Matters (JSCEM) inquiry into the 2022 federal election include consideration of:

(a) reforms to political donation laws, particularly the applicability of 'real-time' disclosure and a reduction of the disclosure threshold to a fixed $1,000;

(b) potential reforms to funding of elections, particularly regarding electoral expenditure caps and public funding of parties and candidates;

The JSCEM's Terms of Reference propose changing the disclosure threshold for political donations for federal purpose from the current $15,200 to $1,000 (returning to the pre-1995 level). A disclosure threshold of $1,000 would be more in line with the respective political finance laws in New South Wales and Victoria.

Recently, two Australian state anti-corruption commissions produced reports examining the potential for political donations to lead to corruption. While these reports mainly focused on their own state political finance laws, they included commentary applicable to the federal jurisdiction.

In February 2022 the NSW Independent Commission Against Corruption (ICAC) reported on Operation Aero, which found that a former NSW Legislative Councillor had engaged in serious corrupt conduct by circumventing the state’s political finance law requirements. In its report the ICAC noted that the discrepancies between federal and NSW law meant that 'all prohibited donors in NSW still have a vehicle to exert political influence by making major donations elsewhere' (p. 269). The report also acknowledged that 'tracking the flow of money – and influence – from donors to campaigners to election expenditure is exceedingly complex' (p. 270).

In October 2022 the Victorian Independent Broad-Based Anti-Corruption Commission (IBAC) released a Special report on corruption risks associated with donations and lobbying. It noted that political donations 'can give rise to a particularly corrosive type of corruption resulting in a loss of confidence that government decisions are being made in the public interest' (p. 14). IBAC particularly noted the issues around:

• donation splitting (where multiple smaller donations are made to avoid the expenditure cap)
• in-kind donations (donations that involve something other than money)
• financial support that is not classed as donations
• a need to have donations disclosed in real time.

While the recommendations were specifically targeted to Victoria’s political finance laws, the IBAC report noted issues with the interactions with Commonwealth laws. These include federal donations over $1000 to associated entities which ran campaigns in Victorian elections.

Not all state anti-corruption recommendations are relevant to the Commonwealth jurisdiction, due to different legal responsibilities assigned by the Australian Constitution. For example, property developers have been banned from making political donations in NSW, Queensland and the ACT, where these jurisdictions are responsible for development approvals. Conversely, the Commonwealth does not generally make local planning decisions of the sort that are most at risk of these forms of corruption. 

In recent years most Australian states and territories have undertaken significant reforms in relation to both political finance and corruption, with the Commonwealth now starting to follow suit. Many of the independent MPs elected in 2022, including Kate Chaney, Monique Ryan and Zoe Daniel, ran on an integrity platform, including transparency in political donations.

Reducing the disclosure thresholds and closing gaps that arise between Commonwealth and state or territory political finance laws is likely to have some impact on the integrity of the system, even if primarily at the state level (in evidence to the NACC inquiry, constitutional expert Professor Anne Twomey notes that the proposed legislation is somewhat unclear in relation to members of parliament and what specifically constitutes their role as a ‘public official’ and how donations might constitute corruption). Reforms to federal political finance legislation should also consider the extent to which it assists or counteracts state and territory anti-corruption laws. In any case, it seems likely that with federal parliamentary inquiries into both political donations and the NACC legislation, some robust discussion of the vexed relationship between corruption and political donations will likely emerge.