6.1
In the terms of reference for the inquiry, the Special Minister of State requested that the Committee undertake a detailed examination of political donations, as outlined in Chapter 1.
6.2
During the Committee’s detailed review, the Minister for Finance referred the Electoral Legislation Reform (Electoral Funding and Donation Reform) Bill 2017 (the EFDR Bill) to the Committee for inquiry and report. The Committee has issued two reports on the Bill and the Government’s response, as noted in Chapter 1.
6.3
In the context of political donations, the EFDR Bill deals with:
the regulation of foreign donations;
the establishment of public registers for key non-party political actors;
modernisation of the enforcement and compliance regime for political finance regulation; and
the definition of activities that constitute political expenditure.
6.4
The EFDR Bill was developed in response to the Committee’s interim report on foreign donations. The Bill also addressed the necessarily linked issues of fundraising and expenditure.
6.5
The EFDR Bill will have a significant impact on the donations, expenditure and disclosure regime in Australian politics and is, at the time of writing, being considered by the Parliament. This Chapter does not reconsider the matters addressed in the Committee’s reports on the Bill.
6.6
One issue that was not considered by the EFDR Bill was the taxation treatment of political parties. This Chapter has discussion and recommendations on this issue.
6.7
Aside from this, it is difficult for the Committee to consider and recommend any changes to the political donations regime before the EFDR Bill has been finalised. Therefore this Chapter makes no further recommendations and instead:
summarises the wider issues regarding political donations that the Committee considered; and
consolidates the evidence received as part of the Committee’s review.
Taxation treatment
6.8
One of the key principles that has guided the Committee’s consideration of political donations is consistency. There must be a level playing field for all players in the political system so they are able to compete freely in the contest of ideas that is at the heart of Australian democracy.
6.9
It is clear that campaigning is occurring year-round, not just at election time, and established political parties are no longer the only voices in electoral campaigning.
6.10
New organisations have emerged which do not nominate candidates to be elected but seek to be an influencing force on how Australians vote in elections. These third-party campaigners are increasingly influential and play an important role in translating and comparing major party policies for the community. Many of these third party campaigners are also registered with the Australian Charities and Not-for-profits Commission (ACNC) and are subject to more favourable taxation treatment than political parties.
6.11
The participation of non-political party organisations is important for our democracy and should be encouraged. As the Minerals Council of Australia (MCA) noted:
It is great that we have more people and organisations participating in the democratic process, and I think that is only for the good; however, again it is the increased transparency that we are very much focused on, so we know exactly where the money is coming from and who is providing it and who is a political actor and who is not.
6.12
The EFDR Bill aims to introduce more transparency into the system, and to assist voters in understanding who gives money to the organisations trying to influence their vote. The EFDR Bill will apply to political parties and their associated entities, third party campaigners and larger political campaigners.
6.13
However, there remains a disparity in the taxation treatment of third party campaigners that are also registered with the ACNC and political parties.
Table 6.1: Summary of tax concessions
|
|
|
|
|
|
|
|
|
Income tax exemption
|
Y
|
Y
Certain types only
|
–
|
|
FBT exemption
|
–
|
Y
Certain types only
|
–
|
|
FBT rebate
|
Y
|
Y
Certain types only
|
–
|
|
GST concessions for charities and gift deductible entities
|
Y
|
Y
Certain types only
|
–
|
|
GST concessions for NFP organisations
|
Y
|
Y
|
–
|
|
DGR endorsement
|
Y
Certain types only
|
Y
Certain types only
|
No but may receive tax deductible donations of up to $1,500 per donor
|
|
Refunds of franking credits
|
Y
|
Y
Certain types only
|
–
|
Source: Australian Taxation Office, Submission 218, p. [7]. Greater detail available in submission.
6.14
The different treatment means that individuals are able to make very large tax deductible donations to charities which then run political campaigns that seek to influence how voters cast their ballot, but a similar donation to a political party to run political communications in the same campaign would not be tax deductible. Some organisations also benefit from certain tax exemptions while political parties do not.
6.15
The Committee received a large volume of evidence in both this inquiry and the inquiry into the EFDR Bill emphasising the importance of charities in Australian society. Charities, it was argued, are acting for the common good of society and ‘are not seeking state power and therefore should not be subject to the same regulations as political parties’.
6.16
The Committee agrees with this point of view for traditionally understood charitable purposes.
6.17
However, many charities do run significant and influential political campaigns and are able to fundraise to support these campaigns with the benefit of offering donors tax deductibility and with certain tax exemptions. Political parties of all sizes, operating in the same campaigning environment are not able to fundraise in the same way and do not benefit from the same tax exemptions.
6.18
Political parties play an essential role in Australian democracy. They offer Australians a way to participate in the process of government, whether by engaging in grassroots activities or by putting their names forward for election to office in local, state/territory and federal government spheres.
6.19
In recognition of the important role all political parties play in support of Australia’s democracy, in an increasingly competitive campaign environment, the Committee’s view is that the existing tax deductibility threshold and tax exemptions for political parties should be examined further. The Committee has not examined taxation law in detail and considers that this issue would be better examined by a committee specifically charged with taxation issues.
6.20
The Committee recommends that the Australian Government refer the issue of tax deductibility thresholds for donations to political parties and the tax concessions available to political parties to the House of Representatives Standing Committee on Tax and Revenue for detailed consideration.
Past Electoral Matters committee inquiries on political donations
6.21
Part XX of the Electoral Act sets out the laws governing disclosure of political donations. The current disclosure regime was introduced in 1983 and remains largely unchanged. Since the 1980s, methods of political campaigning in Western democracies have changed dramatically. Some Australian states have subsequently reformed their disclosure regimes to accommodate these changes.
6.22
At the time of the 1983 changes to the Act, the intention was improved transparency. The Australian Electoral Commission’s (AEC) submission highlighted the key legislative changes since 1984:
In 1996 the election funding reimbursement scheme requiring parties and candidates to lodge a claim for electoral expenditure including all receipts with the AEC was repealed. It was replaced by an election funding entitlement scheme and a requirement for political parties to lodge more comprehensive annual returns.
The Electoral and Referendum Amendment (Electoral Integrity and Other Measures) Act 2006 enacted changes to raise the minimum threshold requirement for donations to be made public to $10,000 for candidates, Senate groups and political parties and for the threshold to be indexed annually to the CPI. It had previously been $200 for candidates, $1,000 for groups, and $1,500 for political parties.
The Tax Laws Amendment (Political Contributions and Gifts) Act 2010 removed provisions allowing businesses to claim a tax deduction for donations to political parties. This applied retrospectively from 1 July 2008. Provisions still allow tax deductions up to $1,500 for gifts and contributions to political parties and Independent candidates and members by individual taxpayers.
2011 report on the funding of political parties and election campaigns
6.23
In November 2011, the Committee considered political finance in detail and made 30 recommendations. These recommendations sought to remedy old Electoral Act provisions, rather than to reform Part XX to regulate modern election campaigning. In summary, the Committee recommended:
Reducing the disclosure threshold to $1 000, without indexation;
Requiring single donations of $100 000 to be disclosed to the Australian Electoral Commission within 14 days of receipt and this information made publically available;
Treating related political parties as the same party for the purposes of the disclosure threshold to prevent ‘donation splitting’ between different branches;
Categorising money raised from fundraising events as a donation;
Making disclosure reporting six-monthly instead of annually, and investigating options for real time online disclosure;
Banning anonymous donations above $50 and prohibiting foreign donations;
Introducing administrative funding to assist with the increased workload of disclosing details of donations and expenditure above the existing threshold;
Requiring political parties and associated entities to disclose more details of expenditure above a prescribed threshold;
Strengthening penalties for more serious funding and disclosure offences and introducing administrative penalties for more straightforward offences;
Extending the Australian Electoral Commission’s powers to conduct compliance reviews and to make the outcomes of reviews publically available; and
Regulating third parties:
Ensuring the frequency of disclosures and disclosable dollar value threshold align with similar regulations for political parties;
Require information about donors to third parties to be disclosed; and
Changing some aspects of how political expenditure is defined in the Electoral Act.
6.24
Dissenting reports show that the Committee could not agree unanimously on several recommendations, including:
Reducing the disclosure threshold;
Regulating the practice of splitting large donations into small amounts;
Regulating income derived from fundraising activities;
Reporting donations received every six months;
Aligning disclosure requirements for political parties and donors; and
Consider capping third party expenditure and capping donations to third parties.
6.25
The report also discussed some topics without making a recommendation:
Capping donations at a fixed value;
Banning donations from corporations and certain industries;
Capping expenditure, including advertising expenditure; and
Registering third party campaigners.
2012 report relating to Part XX of the Electoral Act
6.26
In September 2012, the Committee reported on the AEC’s analysis of a Fair Work Commission report on the Health Services Union national office. The inquiry referral asked the Committee to consider 17 possible changes to Part XX of the Electoral Act, relating to election funding and financial disclosure.
6.27
The possible changes related to:
Improving disclosure, which included reducing the disclosure threshold to $1 000, more frequent reporting and expanding the definition of ‘electoral expenditure’;
Whether associated entities should be classed as third parties; and
Additional compliance measures; for example, administrative penalties withholding public funding, increased penalties for wilful fraud and identify who is responsible for reporting obligations.
6.28
The majority report supported 13 of 17 possible changes. A dissenting report from the then-Opposition opposed all the possible changes.
2018 – Advisory report on the Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017
6.29
In response to the Committee’s second interim report on the 2016 election on Foreign Donations, the Government introduced the Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017 (EFDR Bill).
6.30
The Committee’s report addresses the provisions proposed by the EFDR Bill, and also outlines its preferred approach to:
the establishment of public registers to improve transparency in political campaigning;
the regulation of third party campaigners;
the prohibition of foreign donations for political purposes; and
modernisation of the compliance and enforcement regimes under the Electoral Act.
6.31
A minority report called for a more comprehensive approach to political donations than proposed under the EFDR Bill.
Government responses
6.32
While some changes have been made to political donation regulation as noted above, there has been no wholesale reform of political donations in response to these reports.
6.33
The Committee is aware that many inquiries have been held into the topic of political donations, and that a degree of fatigue has set in. Professor George Williams AO commented:
I'm someone who has worked in the area of political donations and reform for many years; in fact I remember many of the prior inquiries on this subject. I note in the submission of the Australian Electoral Commission they found six prior inquiries on political donations since 2011. With the two current inquiries, that gives us eight over a period of seven years…
I would say that, for many experts involved, it has almost reached the point of submission fatigue on this subject. To be honest with you, it's a matter now of my cutting and pasting the same submission that I have now used for roughly 10 years on this topic. I'm not going to pretend to you I have new material, because in fact if you look at what the experts are talking about, they have largely had a consensus on this topic now for the best part of a decade about what needs to be done.
6.34
The proposed EFDR Bill will set a new framework for political donations should it be passed into law. New initiatives and proposals can then be considered, drawing on the large amount of evidence gathered through the many inquiries already concluded.
High Court judgments
6.35
Recent High Court judgments have given clearer guidance on the constitutional limits of legislation aimed at restricting political donations. This will have an impact on political donations reform.
6.36
The High Court has considered two important cases relating to political donations laws in NSW: the Unions NSW case (2013) and the McCloy case (2015). In both cases, the High Court considered whether restrictions on donations put in place by legislation had infringed the implied right in the Constitution to freedom of political communication.
6.37
The High Court agreed that some of the restrictions were inconsistent with the implied right to political communication, and thus invalid. For the Committee, this means that careful consideration is required to ensure that subsequent reform does not infringe on Constitutional freedoms.
6.38
Although this summary may simplify some legal nuances, the High Court has indicated through these rulings that it is less likely to support:
a ban on political donations from organisations and corporations; and
a ban on sourcing political donations from a small group or class of donors, if the risk of corruption is low.
6.39
Evidence received suggests the High Court would be more likely to support:
caps on expenditure, provided they are reasonable; and
a ban on sourcing donations from a small group or class of donors, if there is an evident risk of corruption.
6.40
There is an element of uncertainty about how the High Court may view other available options for limiting or restricting political donations. This requires a more complex analysis of the specific proposal and its effects on political communication.
6.41
A third case of some significance is AidWatch. In this decision the High Court clarified the capacity of charities to engage in campaign activities.
The implied right to freedom of political communication
6.42
The High Court’s interpretation of the Constitution has developed the concept of an implied right to freedom of political communication. Unlike the United States Constitution, this right is not expressly stated in Australia’s Constitution.
6.43
The High Court has characterised the implied right as a qualified limitation on legislative power, rather than an absolute freedom. A series of tests are used to determine whether a challenged law infringes the implied right. The questions are tested in sequence. They are summarised below:
1
Burden – does the law effectively burden the freedom?
2
Compatibility – is the law’s purpose legitimate to the maintenance of representative government provided for in the Constitution?
3
Proportionality – is the law reasonably appropriate and adapted to advancing the legitimate object? Are the means employed compatible with that system? This involves three steps:
c.
Is the law adequate in its balance?
6.44
In the McCloy case, the majority of High Court justices discussed why proportionality is tested using the above steps:
Proportionality provides a uniform analytical framework for evaluating legislation which effects a restriction on a right or freedom… It has the advantage of transparency. Its structured nature assists members of the legislature, those advising the legislature, and those drafting legislative materials, to understand how the sufficiency of the justification for a legislative restriction on a freedom will be tested.
6.45
Justice Gageler disagreed with the majority’s approach, questioning whether standardised criteria are necessarily appropriate in relation to political communication and questioned whether the concept of balance captures all relevant considerations.
6.46
Professor Anne Twomey, University of Sydney, commented on the tests used in the McCloy case, noting that the majority judgment could be viewed as a directive to Parliament on how to legislate. Professor Twomey stated:
The joint judgment accepted that the ‘balance struck between the importance of the purpose and the extent of the restriction on the freedom necessarily involves a value judgment’, but their Honours contended that this ‘does not entitle the courts to substitute their own assessment for that of the legislative decision-maker’.
It is hard to see how this is so. If the Parliament decides that the importance of the legitimate end far outstrips the significance of the burden on the implied freedom, and the High Court then decides the opposite, surely it is substituting its own assessment for that of the Parliament in striking down the law?
Unions NSW case
6.47
The High Court unanimously found invalid certain NSW state laws regulating how political donations are sourced, as the laws infringed the implied right to freedom of political communication.
6.48
In March 2012, amendments to the Election Funding, Expenditure and Disclosure (EFED) Act 1981 (NSW) (‘the Act’) added new restrictions; political parties could only source donations from individuals on the electoral roll. At the time, s. 96D(1) of the Act stated:
It is unlawful for a political donation to a party, elected member, group, candidate or third-party campaigner to be accepted unless the donor is an individual who is enrolled on the roll of electors for State elections, the roll of electors for federal elections or the roll of electors for local government elections.
6.49
The Act included caps on expenditure. In s. 95G(6), the Act included a rule whereby expenditure among related parties and organisations could be counted collectively.
6.50
Although the Act also banned corporate donations, media reporting suggested that the changes were designed to disadvantage the ALP and unions relative to their political opponents.
6.51
Unions NSW challenged the validity of these laws, arguing that they reduced (or ‘burdened’) the ability of parties and affiliated organisations to exercise their right to political communication. The NSW Government countered that the burden in s. 96D was an inconsequential, indirect and limited burden on political communication.
6.52
To determine whether the laws were compatible with the implied right to political communication, the High Court used a two-stage test:
A law will be invalid under the Lange test if:
(a) the law effectively burdens freedom of communication about government or political matters either in its terms, operation or effect, and
(b) it is not reasonably appropriate and adapted to serve a legitimate end the fulfilment of which is compatible with the maintenance of the constitutionally prescribed system of representative and responsible government and the procedure prescribed by s 128 for submitting a proposed amendment of the Constitution to the informed decision of the people.
6.53
On the first test, the Court agreed that s. 96D, whereby donations could only be sourced from individuals, amounted to an effective burden on the implied right to political communication.
6.54
The Court viewed s. 95G(6) on how expenditure is calculated for parties and affiliates to be an effective burden, because it restricted what a political party could spend on campaigning. Justice Keane said this section amounted to differential treatment and distortion.
6.55
On the second test of being appropriate and adapted to their purpose (the ‘proportionality test’), the Court considered the objectives of both s. 96D and s. 95G(6). The Court acknowledged that provisions in the Act relating to donations and expenditure were ‘directed to the mischief of possible corruption’. The prohibitions in s. 96D, however, were viewed as having a selective and unbalanced intention.
6.56
The Court determined the anti-corruption goal in s. 96D could not be established nor justified. The Court then considered how s. 95G(6) had been intended to prevent circumvention of the spending caps imposed on political parties, but did not believe a link to anti-corruption existed.
6.57
In passing, the majority judgment offered a view on whether banning all political donations might be permissible to prevent corruption:
A complete prohibition might be understood to further, and therefore to share, the anti-corruption purposes of the EFED Act. …if challenged, it would be necessary for the defendant to defend a prohibition of all donations as a proportionate response to the fact that there have been or may be some instances of corruption, regardless of source.
6.58
Justice Keane made a general observation that political communication requires campaigning, which costs money, however added:
It cannot be doubted that the protection of the integrity of the electoral process from secret or undue influence is a legitimate end the pursuit of which is compatible with the freedom of political communication.
6.59
The majority found expenditure caps have a clear purpose and general application.
McCloy case
6.60
In the McCloy case, the High Court upheld NSW laws prohibiting property developers from donating to political parties. The plaintiffs argued these laws impact on political communication, because prohibiting donations curtailed access and influence.
6.61
Mr Jeffrey McCloy (a company director), McCloy Administration Pty Ltd and North Lakes Pty Ltd were property developers within the meaning of the Election Funding, Expenditure and Disclosure (EFED) Act 1981 (NSW). The Act prohibited property developers or their close associates from making donations to political parties or making indirect contributions. The Act also imposed caps on political donations. Mr McCloy had made (or intended to make) donations in excess of the donation caps.
6.62
In the Unions NSW case, the purpose of regulating political donors had been open to debate. In 2014, a new section was inserted into the EFED Act, which clarified that the objective of the law included ‘to help prevent corruption and undue influence in the government of the State’. The NSW Government argued that there had been a history of property developers being involved in corruption, which justified measures to protect the integrity of government.
The majority view
6.63
Whereas the Unions NSW case produced a unanimous outcome, in this instance the High Court diverged and alternative judgments were presented. Chief Justice French and Justices Kiefel, Bell and Keane (the plurality) found the laws in question to be valid. Justice Gageler agreed, but applied different reasoning. Justice Gordon also concurred.
6.64
The plurality began with defining the implied right of political communication in Australia. The plurality noted that, in this case, the effect of caps on political donations is intended to reduce corruption or the perception of corruption. They rejected a narrow view of corruption, contending its forms could vary. The plurality concluded that caps on donations are one way to protect and enhance our system of Government.
6.65
The High Court then addressed whether property developers could be prohibited from donating to political parties. The plurality agreed that they are ‘sufficiently distinct’ from other donors. Adverse reports from the Independent Commission Against Corruption suggested there is a ‘risk of corruption and the loss of public confidence’. Banning property developers furthered the anti-corruption purpose of the EFED Act and, in the plurality’s view, qualified as being a legitimate means of reducing corruption.
6.66
The plurality considered the plaintiff’s argument that other means are available (such as improved disclosure and reporting). This was rejected:
Whilst provisions requiring disclosure of donations are no doubt important, they could not be said to be as effective as capping donations in achieving the anti-corruption purpose of the EFED Act. …it is not the subjective intention of the donor so much as the objective tendency of large payments of money to corrupt both government and the electoral system which is the justification for the restriction.
6.67
The High Court then considered, in some detail, whether the caps and restrictions on property developers are proportionate and concluded:
The provisions do not affect the ability of any person to communicate with another about matters of politics and government… in ways other than those involving the payment of substantial sums of money. … By reducing the funds available to election campaigns there may be some restriction on communication… On the other hand, the public interest in removing the risk and perception of corruption is evident. … The restriction on the freedom is more than balanced by the benefits sought to be achieved.
6.68
General comments were made reiterating that the implied right to political communication is not absolute in Australia and does not work the same way as the right to free speech in the United States Constitution.
Dissenting opinion
6.69
Justice Nettle agreed with the majority that donation caps and indirect contributions were valid; however, found bans on property developer donations to be invalid. The prohibition’s discriminatory nature meant the justification needed to be strong and the focus on property developers was arbitrary. Justice Nettle concluded that the prohibition on property developer donations was not ‘appropriate and adapted’ (or proportionate) to maintaining a system of representative and responsible government.
Implications for making laws on regulating political donations in Australia
6.70
A number of academic experts provided the Committee with their views on the High Court’s decisions in Unions NSW and McCloy.
6.71
Professor Anne Twomey said the proportionality test has provided useful certainty. She said ‘you can be reasonably confident’ a model similar to NSW will survive a legal challenge. She added: ‘I think that the Commonwealth has… much better guidance than they had previously on how the High Court would decide things.’
6.72
Professor Twomey argued that caps should be reasonable and both she and Professor George Williams AO, University of New South Wales, submitted the High Court has confirmed that donation caps are acceptable and valid.
6.73
Professor Twomey submitted the High Court has accepted that certain categories of donors can be banned, if there is a legitimate reason – such as evidence of serious risk of corruption. Professor Williams agreed that ‘categories of donors may be banned where they give rise to an unacceptable risk to the political process.’ Dr Luke Beck, University of Western Sydney, noted that this would need to be demonstrated through empirical evidence.
6.74
A general ban on corporations and organisations making donations is likely to be invalid. Professor Williams submitted:
the decision in Unions NSW v New South Wales suggests that any attempt to limit donations to individuals on the electoral roll has an unacceptable risk of being struck down.
6.75
Dr Beck had a similar view:
… to ban donations from all Australian companies, voluntary associations, lobby groups and other such entities would be in breach of the implied freedom of political communication. There is nothing ‘sufficiently distinct’ about any of those classes of donor that would warrant specific regulation in light of their self-interested pursuit of political influence.
6.76
The law challenged in the McCloy case covered both property developers and others, such as tobacco and gambling companies. The parties and the High Court did not give a view on whether tobacco and gambling could be distinctly linked to corruption and influencing elections.
6.77
On the other hand, capping expenditure is likely to be valid in principle, depending on the effect this has on the freedom to campaign. Professor Twomey submitted:
… limits on expenditure must be calibrated in such a way that parties, candidates and third party campaigners all have a reasonable opportunity to communicate their policies and political preferences to the public and engage in political communication.
6.78
Dr Beck submitted that capping campaign expenditure in a way that counts the spending of an affiliated organisation and a political party is likely to be invalid but added that there could be an exception to this rule:
It follows that there must be serious doubts about the constitutional validity of any attempt by Parliament to legislate to impose caps on campaign expenditure and to count the expenditure of third party entities under the cap of an affiliated political party.
This observation is subject to the proviso that the third party is genuinely a third party and not simply an entity set up for the purpose of circumventing any cap on electoral expenditure.
6.79
In the McCloy case, the High Court used a broad view of corruption. Associate Professor Joo-Cheong Tham, Melbourne Law School, submitted:
It was in part because of this broad approach towards the meaning of ‘corruption’ that the joint judgment concluded that caps on political donations… the ban on indirect campaign contributions… and the ban on ‘property developers’… did not infringe the implied freedom of political communication.
Reform proposals put to this inquiry
6.80
A submission from the Australian Electoral Commission (AEC) identified a series of ‘persistent issues’ with political donations that have been regularly discussed, but remain unresolved:
The timely disclosure of donations. While the frequency of reporting varies in Australia, the AEC suggested that more frequent or real time disclosure provides a greater level of public confidence.
Disclosure thresholds vary in Australia and are subject to ‘considerable debate’.
Defining donations and what constitutes a gift.
Differences among federal, State and Territory laws. The AEC suggested this lack of harmonisation and complexity ‘may add to a perception of a lack of transparency’.
Associated entities and third parties. The AEC noted there is frequent debate on this question. In the United Kingdom, third parties are required to register before incurring expenditure.
Foreign donations. The AEC noted the Commonwealth Electoral Act 1918 (‘the Electoral Act’) applies within Australia and ‘overseas donors cannot be compelled to comply with Australian law.’
Donation splitting, whereby a donation is made in small amounts to avoid limits or thresholds.
6.81
Reform proposals from witnesses and submissions are summarised below. It does not include issues or evidence that were discussed in the EFDR Bill inquiry report.
Limiting or capping donations
6.82
The amount of money an individual or organisation can donate to a candidate or political party could be limited to a prescribed value. The suggested value ranged from $1 000 to $5 000 and reset to zero after a period of time had elapsed.
6.83
Professor Anne Twomey submitted that capping donations may provide incentive to political parties to ‘broaden their public support and collect small donations from larger numbers at the grass-roots level’. Similarly, the Accountability Round Table (ART) supported caps to achieve equality in Australia’s political system. Get Up! said this reform would ‘remove incentives to amass huge political fighting funds.’ Get Up! favoured capping donations at $1 000 per year and disclosing donations above $500 in real time.
6.84
Associate Professor Martin Drum noted that even if caps were introduced, this would not make the system foolproof: a wealthy donor could pass money to ten friends and ask them to donate.
6.85
The Minerals Council of Australia (MCA) suggested all organisations engaging in political advocacy should be subject to the same rules as political parties, with the qualification that the Committee should use its own discretion when considering ‘the best means’ to achieve transparency.
6.86
In contrast, some submissions and witnesses did not support donation caps, instead preferring other measures to improve transparency. For example, Kate Minter, Research Officer, Unions NSW, said:
We do not believe there is a problem. No-one is putting $1 billion into bank accounts in the six months before an election. It is not something we believe was an issue at the last election and we believe it is best addressed through real-time disclosures.
Limiting or capping expenditure
6.87
The amount of money a candidate or political party could spend on election campaigning could be limited. Those supporting this reform gave reasons, but did not always specify a desired limit that should be imposed.
6.88
Associate Professor Tham supported capping expenditure:
The other reason I support caps… is that they provide a degree of fairness in election campaigns by preventing disproportionate spending by political parties and candidates, and… also third parties.
6.89
Professor Twomey also supported caps on expenditure:
This will reduce the amount that needs to be raised by way of donations and also reduce the need for increased public funding. It will have an effect in levelling the playing field, to the extent that there are maximum amounts that can be spent for parties running candidates in all seats.
6.90
Some submissions likened campaign spending to an arms race. For example, the Australian Conservation Foundation (ACF) supported expenditure limits, in order to ‘remove the incentive for politicians to amass big money war chests, and ensure a level democratic playing field for everyone’.
6.91
The World Wildlife Fund supported extending expenditure limits to independent advocacy organisations.
Reducing the disclosure threshold
6.92
Donations above a small value could be disclosed, along with information about who made the donation. Generally, the suggested value ranged from $500 to $1 000.
6.93
Associate Professor Tham said reducing the threshold would uncover instances of donation splitting:
Donation splitting, for example, is a problem… where you are allowed to make an anonymous donation up to the disclosure threshold, which… is about $13,000. One could split a donation of $50,000 across the different branches of a major political party and get the benefit of anonymity.
6.94
The Nationals supported the current disclosure threshold and made the following observation:
Disclosure law should recognise the fine balance that exists between the public interest and an individual’s right to privacy. Disclosure provisions should not be so onerous as to discourage individual participation in the political process.
6.95
Family Voice Australia favoured making large donations transparent, because they ‘may accompany attempts to exert undue influence’. However, for reasons of protecting privacy and compliance costs, Family Voice Australia preferred leaving small donations undisclosed. Mr John Gregan (private capacity) suggested individual donations should remain anonymous, ‘due to the modern trend of victimisation by activists’.
6.96
Some submissions and witnesses discussed ways donations could be received in another form or via an intermediary in an effort to avoid transparency. The Uniting Church (Synod of Victoria and Tasmania) submitted:
Many of these arm’s length organisations do not disclose the payments that are made to them, effectively concealing the origins of the money...
6.97
Market Forces observed that donations could be disguised; for example, by categorising these funds as ‘other receipts’. Their submission stated:
This category can include anything from dividends, to attendance fees for events to membership fees for interest groups. …political parties and donors should be required to provide far more information on events attended and interest groups, including dates, attendees and policies discussed.
6.98
The MCA said it ‘does not make donations as such’, but contributes to political parties in return for attending functions. The MCA added that it does not receive donations because its members pay subscriptions, ‘just like workers who pay subscriptions to the union’. The MCA said these subscriptions are tax deductible.
Timing of disclosures
6.99
There is currently a significant time lag before donations are disclosed. For the 2016 federal election, returns are published 24 weeks after election day – 19 December 2016.
6.100
A number of witnesses supported real time disclosure and other changes to improve transparency. Unions NSW submitted that voters have the right to be informed before they vote, so they can scrutinise the monetary support base of parties and candidates. 350.org (Australia) submitted:
… a coal company could donate generously to a pro-coal candidate in advance of an election being called and not have to disclose their donation until well after the new Government is sworn in.
6.101
Associate Professor Drum said that with advances of technology, the release of information should occur soon after the donation. Dr Belinda Edwards, University of New South Wales, said this ‘should be entirely possible in this day and age’. Dr Edwards submitted that donations data could be improved for easier analysis:
There are thousands of lines of data, with limited means to sort or categorize the data …journalists and those seeking to report on political donations matters struggle to piece together meaningful perspectives within the resources available to them.
6.102
The Nationals cautioned against increased disclosure frequency, noting the added costs involved:
Any move to increase the frequency of reporting donations must acknowledge… These compliance costs have a disproportionate impact on smaller parties such as The Nationals, which needs to be taken into account when assessing the impact they have on parties.
6.103
The Liberal Party of Australia also commented on the ‘considerable burdens’ associated with compliance and suggested that if changes are being contemplated, the Committee consider whether ‘regular funding for administrative purposes would assist the parties in meeting these increased compliance obligations’.
6.104
The Australian Labor Party (ALP) supported real-time disclosure in principle, but noted its potential to be ‘an unrealistic burden’ that would need to be widely understood among party members and volunteers. Vote Australia commented that short time periods could ‘impinge on accuracy.’
Require all donations to be lodged via a trust fund
6.105
To improve transparency, it was proposed that the AEC could receive donated funds. Instead of parties receiving donations directly, Professor Twomey said that this method would assist with real-time disclosure and the AEC could validate the donation and reject irregular or banned donations. Mr Malcolm Baalman (private capacity) suggested that this should cover both federal and state donations.
Banning donations from types or classes of donors
6.106
Certain groups or organisations could be prohibited from donating to political parties or candidates. Some proposed that only individuals should be allowed to donate – not corporations or unions.
6.107
The Australian Greens recommended a ban on political donations from developers, banks, mining companies and tobacco, alcohol, gambling and pharmaceutical industries. The submission added:
While the Greens support a ban on all for profit bodies we recognise that this will not be immediately achieved without constitutional reform. Bringing in a ban on sectors that have been found to have a corrupting influence on the political process or are perceived to have such an influence is another way to take meaningful steps to cleaning up political donations.
6.108
350.org (Australia) shared a similar view, submitting:
Big Coal and Gas cause just as much if not more damage than Big Tobacco. Fossil fuel money should be rejected. Sectoral bans on socially damaging industries, like those currently in force in NSW… should be applied to fossil fuels.
6.109
Legal experts gave evidence on how two recent High Court decisions are likely to affect the way classes of donors can be regulated. For example,
Dr Beck cautioned:
It seems to me that to ban donations from all Australian companies, voluntary associations, lobby groups and other such entities would be in breach of the implied freedom of political communication.
6.110
The ALP did not support bans on classes of donors:
Any new proposal to regulate campaign donations to exclude certain participants… from making donations, as a matter of law, has the ability to advantage one group of campaigners over another group of campaigners. This is antidemocratic and potentially unconstitutional.
6.111
The ALP’s submission added that nothing prevents a political party from voluntarily declining to accept donations from certain sources.
6.112
ART suggested that rather than banning donations from any class of donor, a cap on all sources of donations would address concerns relating to undue influence. The Nationals preferred an approach based on transparent disclosure, submitting that ‘the appropriateness of accepting any donation should be the prerogative of the intended recipient.’
Establish an anti-corruption body
6.113
The Committee received evidence recommending the creation of a federal anti-corruption body with powers to investigate donations. Associate Professor Drum said an anti-corruption body could better oversight political donations:
Problems surrounding political donations at state level have been regularly investigated by anti-corruption bodies. An anti-corruption body at a national level would be a welcome development.
6.114
The ACF said this would ‘strengthen public confidence in the Australian Parliament.’
Committee comment
6.115
The EFDR Bill, if passed, will significantly reform the transparency of political donations in Australia: including introducing new regulations for third party campaigners and political campaign organisations; banning foreign donations; and increasing penalties for non-compliance.
6.116
After this Bill is passed and implemented, it will be time to review other proposed reforms, built on the groundwork laid by this Committee.
Other jurisdictions
6.117
The following provides a summary of regulatory arrangements for political donations (or campaign finance) among Australian and selected international jurisdictions. It mainly considers:
donation and expenditure limits or other notable restrictions;
disclosure of donations and expenditure;
public funding for political parties and candidates;
third party campaigners; and
significant court rulings involving questions of both political donations and freedom of speech in the US and Canada. These are contrasted with Australian cases.
6.118
There are diverse regulatory arrangements for political donations among both international and Australian jurisdictions with comparable democratic political systems.
6.119
This reflects the status quo as at August 2018, and does not incorporate proposals currently before the Federal Parliament in the form of the Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017.
How does Australia compare to other countries?
6.120
Australian Federal election campaigns are unique in four areas when compared to Canada, New Zealand, the UK and the USA:
donations are not limited or capped and can be received from any source, including from foreign entities, corporations and unions;
there are no limits or caps on campaign expenditure;
reporting and disclosure occurs annually; and
Australian federal elections are not fixed term.
6.121
Table 6.2 provides a comparison of Australia with selected countries.
Table 6.2:
|
|
Australia
|
Canada
|
New Zealand
|
UK
|
USA
|
|
Foreign Donor Ban
|
No
|
No
|
No
|
Yes
|
Yes
|
|
Union and corporate donor ban
|
No
|
Yes
|
No
|
No
|
Yes
|
|
Anonymous donor ban
|
No – but $ limit
|
No – but $ limit
|
No – but $ limit
|
No – but £ limit
|
No – but $ limit
|
|
Expenditure limits
|
No
|
Yes
|
Yes
|
Yes
|
Yes – for party committees
|
|
Public funding
|
Yes
|
Yes
|
Yes – for campaigns and policy
|
Yes
|
Yes
|
|
Public Reporting
|
Annual
|
Annual and quarterly
|
Annual
|
Quarterly – but more often during elections
|
Periodic – but more often during elections
|
Source: International Institute for Democracy and Electoral Assistance – Political Finance Database
Australian jurisdictions
6.122
In Australia, different rules apply federally and in each state and territory.
6.123
These arrangements are summarised in the table below.
Table 6.3:
|
|
NSW
|
VIC
|
QLD
|
WA
|
SA
|
TAS
|
ACT
|
NT
|
|
Foreign donor restriction
|
Yes
|
Yes
|
Yes
|
No
|
No
|
No
|
No
|
No
|
|
Banned donor industries
|
Yes
|
Yes
|
No
|
No
|
No
|
No
|
No
|
No
|
|
Anonymous donor threshold
|
$1,000
|
$1,000
|
$1,000
|
$2,300
|
$200
|
None
|
$1,000
|
$1,000
|
|
Donor contribution limits
|
$6,100 per year
|
$4,000 per election period
|
None
|
None
|
None
|
None
|
None
|
None
|
|
Expenditure limits
|
$1.1m
|
None
|
None
|
None
|
$4m
|
None
|
$1m
|
None
|
|
Public funding
|
Yes
|
Yes
|
Yes
|
Yes
|
Yes
|
No
|
Yes
|
No
|
|
Public reporting and disclosure
|
Yes
|
Yes
|
Yes
|
Yes
|
Yes
|
No
|
Yes
|
Yes
|
Source: Parliamentary Library, ‘Election Funding and Disclosure in Australian States and Territories: A Quick Guide’, November 2017. Updated November 2018 to reflect changes to Victorian electoral law.
Federal
6.124
Details of donations over $13 500 (indexed) must be disclosed by parties and their associated entities and donors annually, and by candidates in their election returns.
6.125
Parties and their associated entities must lodge annual returns listing their total receipts, total payments and total debts. Candidates and unendorsed Senate groups must disclose electoral expenditure during the election period. The Australian Electoral Commission publishes annual returns for each financial year its website the following February.
6.126
Public funding of $2.68 per formal first preference vote (indexed) is provided to candidates and parties who receive more than 4 per cent of the total vote in their electorate. There is no public funding available for administration or other organisational or policy development purposes.
New South Wales
6.127
Donations to political parties are currently capped at $6 100 per year and $2 700 for a candidate (indexed).
6.128
Donations or gifts of $1 000 or more must be disclosed. Only individuals on the electoral roll or organisations with an Australian Business Number can donate. Property developers, tobacco, liquor and gambling industries or their close associates cannot donate.
6.129
Political parties are limited to expenditure of up to $1.1 million (indexed) in the period leading towards an election. A secondary limit of $61 500 is applied to each electorate. Third party expenditure is capped at $1.3 million. All electoral expenditure must be disclosed annually by parties, candidates and third party campaigners.
6.130
Parties receive public funding for election campaign expenditure, administrative expenses and policy development. Parties need to receive 4 per cent of primary votes to be eligible. Reimbursement is structured on a sliding scale. A political party with candidates in the Legislative Assembly will receive a maximum reimbursement of 100 per cent of the first 10 per cent of expenditure, 75 per cent of the next 10 to 90 per cent of expenditure, and 50 per cent of the last 90 to 100 per cent of expenditure. Payments for administrative funding are based on the number of elected members, starting at $265 000 per annum (indexed) and limited to $3 million.
Victoria
6.131
Victoria introduced wide-reaching changes to funding and disclosure requirements in 2018.
6.132
From 1 August, foreign donations and anonymous donations of $1 000 or more were banned.
6.133
From 25 November, donors and recipients are required to disclose all donations of $1 000 or more to the Victorian Electoral Commission within 21 days.
6.134
Donations from a single donor to any one recipient are capped at $4 000 per election period (normally 4 years). For the purposes of this cap, a registered political party, including its candidates, are considered a single recipient. This precludes a donor making multiple donations to individual candidates endorsed by the same party.
6.135
Federally-registered parties submit a copy of their return to the AEC.
6.136
All candidates, elected members and groups not endorsed by a registered party who received any donations from a single donor totalling $1 000 or more are now required to submit an annual return.
6.137
Public funding of $1.67 per vote is provided to political parties or candidates who received at least 4 per cent of first preference votes. Eligible parties and candidates submit an audited statement of total actual expenditure. The Victorian Electoral Commission reimburses these expenses and publishes the amount paid.
Queensland
6.138
Donations or gifts of $1 000 or more must be disclosed. Donations or loans of $1 000 or more must be declared within days and total donations, loans and electoral expenditure must be declared within 15 weeks of polling day. Third parties who incur electoral expenditure over $1 000 must declare donations over $1 000 within 7 days.
6.139
Electoral expenditure returns must be submitted by parties, candidates and third parties, regardless of whether the spending is during the election period. Evidence of expenditure must be retained.
6.140
Public funding is provided to political parties and candidates for election campaign expenditure and policy development.
6.141
Election funding is calculated as an amount per formal first preference vote for political parties or candidates who receive more than 6 per cent of the total number of formal first preference votes. As of July 2017, the amount is $3.14 for political parties and $1.57 for individual candidates (indexed). If the electoral expenditure of the party or candidate is less than the amount calculated based on the number of votes, the lesser amount is paid. A $3 million pool of funding for policy development is available to eligible political parties, distributed proportionately based on first preference votes.
Western Australia
6.142
All political parties and associated entities are required to disclose the value of all gifts and other income received. Gifts above $2 300 (indexed) must be detailed along with the details of donors.
6.143
Political parties, associated entities, candidates and groups who incur expenditure for political purposes are required to disclose all gifts received and expenditure incurred for election purposes.
6.144
Public funding of $1.87 per vote is provided to candidates who received at least 4 per cent of first preference votes, up to the actual election expenditure incurred. There is no public funding for administration or other organisational or policy development purposes.
South Australia
6.145
Donations, gifts and loans over $5 000 (indexed) must be disclosed by political parties, candidates, associated entities and third party campaigners. Donors must declare gifts over $5 000. Parties or candidates that have incurred more than $5 000 (indexed) of political expenditure during a campaign period must lodge a political expenditure return.
6.146
South Australia has an optional public funding scheme. Those who opt-into public funding are subject to an indexed expenditure cap. Candidates who receive at least 4 per cent of the primary vote are eligible for public funding, ranging from $3.00 to $3.50 for every formal first preference vote.
6.147
Political parties represented in Parliament are eligible for administrative funding of up to $12 000 (indexed), depending on the number of representatives.
Tasmania
6.148
There are no legislated requirements for donations to be disclosed. Federally-registered parties submit a copy of their return to the AEC.
6.149
There are no expenditure limits for House of Assembly elections. There is no public funding for election campaigning or administrative costs.
6.150
Legislative Council elections are subject to an indexed candidate expenditure limit, which is currently at $16 000. Political parties cannot incur any expenditure. Legislative Council candidates must submit election returns detailing their campaign expenditure.
Northern Territory
6.151
Political parties must submit annual returns showing total amounts received and detailing gifts of $1 500 or more. Donors of $1 500 or more must submit returns. Candidates must disclose details of gifts of $200 or more. Political parties report Candidate expenditure on their behalf. Publishers and broadcasters must lodge returns detailing electoral advertisements totalling more than $1 000.
6.152
There is no public funding of election campaigns.
Australian Capital Territory
6.153
Members of the Legislative Assembly, registered political parties and associated entities are required to disclose details of donations greater than $1 000 in annual returns. There are additional disclosure requirements during election years for political parties, non-party candidates, associated entities and third party campaigners.
6.154
Election campaign expenditure is limited to $40 000 per candidate (indexed). Associated entities and third parties are also subject to expenditure caps.
6.155
Public funding of $8.00 per vote is provided to candidates who receive more than 4 per cent of first preference votes. Eligible Members of the Legislative Assembly receive administrative funding of $21 322 per annum (indexed).
Selected international jurisdictions
New Zealand
6.156
Political party expenses (and their candidates) are limited to NZ$1.115m plus NZ$26 000 per electorate contested. This applies during a regulated period immediately prior to a general election. Audited returns detailing expenses must be lodged within 90 working days after election day.
6.157
Donations exceeding NZ$15 000 (or a series of donations greater than $1 500 reaching this threshold) must be declared in an annual return. Anonymous donations and foreign donations above $1 500 are prohibited. Donations greater than $30 000 must be disclosed within ten working days.
6.158
All registered political parties are allocated public funding for election advertising during the general election period. During the 2017 general election, a pool of NZ$4.145 million was available.
6.159
Third parties are subject to spending limits during a regulated general election period. Registered promoters are limited to NZ$315 000 and unregistered promoters are limited to NZ$12 600. Registered promoters who spend more than NZ$100 000 must lodge an expense return within 70 working days of election day There are no limits on donations to third parties or requirements to report those donations.
United Kingdom
6.160
Donations over £500 can only be received from permitted donors. These include an individual voter on the UK electoral register and companies, associations, unions and other organisations that are registered in the UK. Single donations (or a series of donations) over £7 500 must be disclosed and reported. Returns must be submitted on a quarterly basis and on a weekly basis when an election is called.
6.161
Expenditure caps apply during the year prior to an election. During the 2017 election, a £30 000 cap was applied to each seat contested.
6.162
A £2 million pool is available for policy development grants to eligible political parties. Some funding is available to assist opposition parties with parliamentary business.
6.163
Third party campaigners must register if they intend to spend more than £20 000 in England or £10 000 in Scotland, Wales or Northern Ireland in the year preceding a general election. Unregistered campaigners are limited to these amounts. During the 2017 election, a general limit of £390 000 applied to third party campaigners for whole-of-UK campaigns. Lower limits applied for regional or constituency campaigns. Donations above £500 can only be accepted from permitted sources. Single donations (or a series of donations) over £7 500 must be disclosed and reported.
Canada
6.164
Political donations are capped at CA$1 500 per calendar year to political parties and party-endorsed candidates. There are also caps on candidate contributions to their own campaigns. Unions and corporations cannot make political donations.
6.165
Expenses are capped for each electoral district, based on the number of electors and the length of the election period. In 2015, these limits ranged from around CA$170 000 – $250 000 for candidates and up to CA$55 million for larger political parties. Party limits vary depending upon how many districts are being contested.
6.166
Eligible political parties receive public funding for up to 50 per cent of their general election expenses. Candidates receive public funding for up to 60 per cent of their election expenses. Eligible political parties and candidates are allocated public broadcasting time.
6.167
Third parties are required to register with Elections Canada when they have incurred electoral advertising expenditure greater than CA$500. Third party electoral advertising is subject to a general limit of CA$211 000, which is adjusted for inflation and the length of the election period. Third parties must submit a report on their expenditure and funding obtained for the purpose of electoral advertisements.
6.168
Third parties can be an individual, a corporation or a group – a ‘group’ can be an unincorporated trade union, trade association or others who are acting together for a common purpose. Third parties may not act in concert to circumvent the limit of election advertising expenditure.
6.169
Traditional forms of advertising (such as pamphlets and billboards) must show a third party’s authorisation. Election advertising on the Internet is regulated if there was a placement cost or partisan statements; however not all forms of media or communication are necessarily covered:
social media posts placed free of charge;
emails and text messages; and
Harper case (2004) – third party expenditure limits
6.170
Freedom of thought, belief, opinion and expression is entrenched in Canadian Charter of Rights and Freedoms. This is subject to a qualification:
The Canadian Charter of Rights and Freedoms guarantees the rights and freedoms set out in it subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.
6.171
In 2004, Mr Stephen Harper, a future Canadian prime minister, challenged a law limiting ‘third party’ election advertising expenses. Mr Harper won, but lost on appeal to the Canadian Supreme Court.
6.172
The majority found that the right to free speech has to be reconciled with the right to vote in an informed way and concluded that the limits on third party spending were justified, as there were not overly restrictive and did not interfere with an individual’s right to participate in the electoral process. The Court held that Equal opportunity for participation in the political process enhanced voting rights.
6.173
When the Australian High Court considered the McCloy case, the majority referred to the Harper case with supportive sentiments.
United States
6.174
In the United States, political expenditure and political donations differs from the Australian judicial perspective as freedom of speech is entrenched in the United States Constitution’s First Amendment.
6.175
Election campaigns are subject to donation limits.
US$2 700 per election to a federal candidate or candidate committee (each stage of the election process – primaries, runoffs and general elections are counted separately).
US$5 000 per year to a federal Political Action Committees (PACs). PACs are groups that receive donations to support federal candidates or to fund other election activities.
US$10 000 per year to a State or local party committee. A State party committee shares its limits with local party committees in that state unless a local committee’s independence can be demonstrated.
US$33 400 per year to a national party committee. This limit applies separately to a party’s national committee, House campaign committee and Senate campaign committee.
US$100 in currency (cash) to any political committee and anonymous cash donations are limited to US$50.
Super PACs (which do not directly support a candidate or committee) can receive unlimited donations.
Unions and corporations cannot donate to candidates, but can provide unlimited amounts to Super PACs.
6.176
Candidate committees report money raised and spent on a quarterly basis. There are additional reporting Candidate committees within 20 days of election day. Any contribution over $1 000 has to be reported within 48 hours. The Federal Election Commission’s website has a searchable portal with information on donors and the amounts donated.
6.177
Presidential nominees can be eligible for a grant of up US$20 million of public funding, provided they limit their spending to this same amount and do not receive private contributions. Individual taxpayers can check a box on their federal income tax return to indicate whether US$3 from their taxes can be used for the Presidential Election Campaign Fund.