1. Introduction

1.1

The Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017 (‘the Bill’) was introduced in the Senate on
7 December 2017. In anticipation of its introduction, the Minister for Finance referred it to the Joint Standing Committee on Electoral Matters (JSCEM) stating:

Australians do not want foreign governments, foreign billionaires, or foreign companies influencing Australian politics. I am pleased to note this important principle has broad support across the Parliament.

Importantly, this Bill takes into account the realities of contemporary political campaigning, in which may different political entities – political parties, independent candidates, trade unions, interest groups, advocacy groups and others – spend millions of dollars each year to influence voters.1

1.2

The Explanatory Memorandum further states the Bill’s intent:

The integrity, real and perceived, of Australia’s electoral system is critical to our system of government. However, Australia’s regulatory approach to political finance has not kept pace with international and domestic developments.

Election campaigning has radically changed through the professionalisation of politics and the proliferation of media advertising. New political actors neither endorse candidates nor seek to form government, yet actively seek to influence the outcome of elections. While a positive indicator of the strength of Australian civil society and civic engagement, these new actors lack the public accountabilities of more traditional actors, such as registered political parties or parliamentarians.

Internationally, media reports increasingly document foreign attempts to influence elections around the world. This is problematic, because the real and perceived integrity and fairness of elections is critical to peaceful democratic government.2

1.3

Amending the Commonwealth Electoral Act 1918, the Bill proposes to:

establish public registers for key non-party political actors;

enhance the current financial disclosure scheme in the Commonwealth Electoral Act 1918 (the Electoral Act) 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 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.3

Definitions

1.4

The Bill introduces and expands a range of definitions Commonwealth Electoral Act 1918.4 The most important are:

allowable amount – any amount received by the person or entity, or to which the person or entity has access, during the financial year except gifts from a non-allowable donor, and loans.

allowable donor – an individual who is an Australian citizen or resident; an entity that is incorporated or whose principle activity is based in Australia.

associated entity – (expanded definition) an entity that operates wholly, or to a significant extent, for the benefit of registered political parties.

political campaigner – a person or entity that incurs political expenditure of $100,000 over the previous 3 financial years, $50,000 or more in a financial year or 50% of the allowable amount in a financial year.

third party campaigner – a person or entity that incurs political expenditure of more than the disclosure threshold ($13,500 indexed) in a financial year.

political purpose – the public expression of views on a political party, candidate, Member, Senator or on an issue likely to be before electors in an election; the broadcast of certain political matter; the carrying out of opinion polls or research relating to an election or voting intentions.

1.5

The term gift is used throughout the Bill, as this is the term used in the Act to refer to donations. The new definition of allowable amount makes clear that other funds used by an entity for political purposes, such as corporate funds and membership fees, are also captured by the Bill.

Previous Committee comment

1.6

As part of its inquiry into the conduct of the 2016 federal election, the Committee has been considering the matter of political donations. Evidence to that inquiry has informed the Committee’s consideration of this Bill.5

1.7

The Bill responds to the Committee’s Second Interim Report on the inquiry into the conduct of the 2016 federal election: Foreign Donations tabled in March 2017. In this report the Committee recommended that:

donation reform be in accordance with Australia’s sovereign interests;

donation reform be consistent with the principles of:

transparency;

clarity;

consistency; and

compliance.

there be a prohibition on donations from foreign citizens and foreign entities to Australian registered political parties, associated entities and third parties;

the Committee continue to examine the extension of a foreign donations ban extending to all other political actors, including the issue of ‘channelling’; and

there be stricter penalties for non-compliance incorporated in the Commonwealth Electoral Act 1918.6

1.8

Foreign donations as a subset of the broader issue of donations cannot be examined in isolation of the broader consideration of donations legislation. Consequently, the Committee considered the Bill in the context of its previous and present work on transparency, consistency, clarity and compliance.

1.9

The Committee notes that it will be making further comment on the wider issue of the political donations regime in its next report on the conduct of the 2016 federal election.

1.10

JSCEM, over many years, has commented on the issue of political funding. In particular, the Committee’s 2011 Report on the funding of political parties and election campaigns contains an extensive discussion on political and election funding.7

Interaction with other legislation

1.11

The Bill interacts with the National Security Legislation Amendment (Espionage and Foreign Interference) Bill 2017 (the EFI Bill). Specifically the EFI Bill references definitions established by the Bill, namely:

disclosure amount; and

political campaigner.8

Principles and purpose

1.12

The Committee has adopted four principles as fundamental to a trusted system for political donations, being:

Transparency via visible and timely disclosure of donations and donors;

Clarity about what is required and by whom;

Consistency of regulations, so that they capture all participants and support a level playing field; and

Compliance through enforceable regulations with minimal, practicable compliance burdens.

1.13

In its consideration of the wider issue of donations reform, the Committee has heard calls for the following principles to be embedded in the system:

improved transparency of and accountability;

a level playing field;

fairness and equity;

the preservation of the exercise of free speech;

reduction in perceptions of undue influence; and

reduction in the risk of corruption.

1.14

The Committee considered the Bill in the context of its previous and current work on political donations and the four principles outlined above. It also considered the following questions:

Will it effectively restrict foreign donations and increase transparency?

Is compliance achievable?

1.15

The purpose of the Bill, as stated by the Minister in his second reading speech and in the media, is to address potential foreign influence on Australian elections.

1.16

To do this, electoral legislation must regularly ensure to remain aligned with the changing nature of election campaigns in Australia. Political campaigners – organisations that either exist solely, or have significant expenditure, for political campaigns – have emerged as significant players in Australia’s political landscape. Their issues-based advocacy can influence electoral outcomes, but are not currently subject to the same financial transparency that political parties are subject to.

1.17

Similarly, third party campaigners – organisations or groups that spend money on political campaigns for the purposes of influencing voters – are increasingly prominent.

1.18

The fact the current campaign environment has evolved was reflected in evidence provided to the inquiry. Campaigning has now moved beyond the traditional election period where the writs are issued and now occurs 365 days a year. Dr Martin Drum observed:

We now live with the reality that campaigning happens 24 hours a day, 365 days of the year… Continuous campaigning also makes the regulation of third-party campaigners more important. That's because campaigners now seek to achieve political outcomes that are outside of set electoral periods.9

1.19

It will be impossible to remove the influence of foreign money from Australian politics without increasing the transparency measures of all political actors.

1.20

The Committee has carefully considered the evidence received and weighed the concerns of submitters with the need for a transparent, trustworthy, electoral system.

1.21

The core principle proposed by the Bill, being transparency, is uncontested in submissions received by the Committee. However, the Committee recognises that there are concerns about the clarity and the compliance burden of some proposed measures.

1.22

The recommendations made by the Committee aim to address these concerns to ensure the Bill can align with these principles.

1.23

Further, the Committee considers that simplicity is a core principle that should guide all proposed amendments to the Electoral Act. The Act should be a supporting framework for maximising participation in our democracy, in positive terms, and where amendments are necessary, they should be made in the simplest terms possible.

1.24

The Act is a complex framework developed in the 1980s that is in effect being regularly retrofitted to modern election campaigning practices which can lead to greater drafting complexity.

1.25

Ultimately, voters deserve to know where any money seeking to influence their vote comes from – whether that be from foreign sources, corporate or business interests or the charitable sector.

1.26

The recommendations made in this report seek to simplify the amendments to the Electoral Act with a view to encouraging greater participation in our democracy and improving trust and confidence in Australian politics.

Similar Bills

1.27

Both the Australian Labor Party10 (the Labor Bill) and the Australian Greens11 (the Greens Bill) have bills before the Senate addressing donations reform, including bans on foreign donations. As detailed below, the Labor Bill and the Greens Bill are broadly the same, differing primarily on the establishment of public funding regime provisions and disclosure and return timeframes.

1.28

They are both broadly consistent with the Bill before the Committee (for the purposes of this section referred to as the Government Bill), namely:

the limitation of public funding to demonstrated electoral expenditure;

strengthening of penalty provisions (albeit with lesser penalties than that proposed in the Government Bill);

banning foreign donations, including donations made from foreign bank accounts;

the treatment of unlawful gifts.

1.29

Sharing some features with the Government’s Bill, the Labor Bill and the Greens Bill restrict foreign donations to political parties and candidates, including in some situations to third parties that incur reportable political expenditure.

1.30

The Government Bill allows donations of up to a cumulative $250 before donor information is sought. Both the Labor Bill and the Greens Bill limit anonymous donations to $50.

1.31

Where the Government Bill defines ‘allowable donors’, the Labor Bill and the Greens Bill define ‘Australian property’ and ‘foreign property’. Recipients may only accept gifts of Australian property. Both the Labor and Greens Bills prohibit the transfer of foreign property to another person for the purposes of making the property appear to be Australian property for the purposes of a donation.

Australian Labor Party

1.32

The Labor Bill would:

reduce the disclosure threshold to $1,000 (non-indexed);

for the purposes of the $1,000 threshold and disclosure of gifts, treat related political parties as one entity;

provide for returns to be made within 20 weeks of the end of the reporting period;

make unlawful the receipt of a gift of foreign property by political parties, candidates and members of a Senate group. It will also be unlawful in some situations for associated entities and people incurring political expenditure to receive a gift of foreign property including charities; (‘foreign property’ means money credited to an account, cash, or property other than money that is located outside Australia; property that is transferred to Australia for the purposes of making a gift is taken to be foreign property.)

prohibit the receipt of anonymous gifts by registered political parties, candidates and members of a Senate group, and in some circumstances, associated entities;

anonymous gifts are permitted if the gift is less than $50 and received at a general public activity or a private event, the details of which are recorded.

limit public election funding to declared expenditure, or the sum payable on first preference votes where the 4% threshold is satisfied, whichever is lesser;

insert a new definition of ‘electoral expenditure’ that may be the subject of a claim for public election funding;

establish a process for claims to be made.

provide for the recovery of unlawful gifts;

unlawful gifts must be returned within 6 weeks or their value paid to the Commonwealth.

introduce new offences and penalties related to the new measures and increase the penalties for existing offence provisions;

maximum penalty proposed is imprisonment for 2 years or 240 penalty units or both.

Australian Greens

1.33

The Greens Bill would:

reduce the disclosure threshold to $1,000 (non-indexed);

require all gifts to be disclosed within 8 weeks;

require returns from those who have incurred political expenditure to provide returns within 8 weeks of 31 December and 30 June each year;

prevent ‘donation splitting’ but treat related political parties (including state branches) as one entity for the purposes of the disclosure threshold;

make unlawful the receipt of a gift of foreign property by political parties, candidates and members of a Senate group. It will also be unlawful in some situations for associated entities, and people incurring political expenditure to receive a gift of foreign property including charities; ‘foreign property’ means money credited to an account, cash, or property other than money that is located outside Australia

property that is transferred to Australia for the purposes of making a gift is taken to be foreign property.

extend the ban on anonymous gifts to all gifts except those that are $50 or less, and those received at a ‘general public activity’ or a ‘private event’, the details of which are recorded;

provide for the recovery of unlawful gifts;

unlawful gifts must be returned within 6 weeks or their value paid to the Commonwealth.

introduce new offences and penalties related to the new measures and increase the penalties for existing offence provisions;

maximum penalty proposed is imprisonment for 2 years or 240 penalty units or both.

insert a new definition of ‘electoral expenditure’ that may be the subject of a claim for public election funding.

Regulation of all political actors

1.34

This Bill would apply to all actors engaging in political campaigning – including political parties, charities and not-for-profits, corporate entities and individuals.

1.35

There is a broad consensus amongst political and civil society groups on the need to remove actual, and the potential for, foreign influence in our electoral system. However, the means by which to achieve this, and to whom the regulatory framework should apply, has been robustly debated.

1.36

A number of witnesses advocated the need for uniform regulation of political activity and disclosure requirements. Dr Martin Drum observed:

In simple terms, there does need to be a level playing field—people who are seeking to spend a substantial amount of money to influence public opinion should disclose their funding sources whether they are members of political parties or other organisations.12

1.37

Prof. George Williams observed:

I think that if you simply have a regime focusing upon political parties or others the money will flow to other sources, and the scheme will be evaded. I think that the rules should apply irrespective of the status of the organisation, whether it be a charity or other body, and, indeed, the most effective systems recognise the need for that.13

1.38

Dr Colleen Lewis, Director of the Accountability Round Table, observed:

There's also a need for complete disclosure by everyone. That's political parties, candidates, associated entities and third-party entities. There is really no reason, if people are advocating for greater democracy, that they wouldn't be prepared to then make these things known.14

1.39

Mr Malcolm Baalman observed:

if your objective is to prevent a foreign entity—which is going to be difficult for us to identity and police—from donating into the Australian political climate, if you ban it from donating to one defined class of entity but not others, the money will flow and you'll come back three years later and go, 'Now we have to address that it's flowing to these other organisations.'

1.40

Mr Baalman further noted that:

if we start seeing more entities of the GetUp class in the country, which I think is probably a good thing in principle, and we don't bring them inside the transparency system, we will find that the donations move from the political parties and the associated entities and start flowing to those vehicles, much as the PACs and super PACs have happened in America, and we'll be chasing our tails for decades trying to bring them back in.15

1.41

In particular, the charities and not-for-profits sector argued for its exemption from significant provisions contained in the Bill, despite the evolution of issue-based advocacy into election campaigns.

1.42

A number of submitters expressed concern for the potential of foreign influence in Australian elections by charities and not for profits, and this is currently unregulated. In response to a question on the possibility of charities using foreign money to engage in political advocacy, Commissioner of the Australian Charities and Not-for-profits Commission (ACNC), Dr Gary Johns confirmed:

That's right. There is nothing in our act which would prevent that activity.16

1.43

Furthermore, following a question on whether or not charities seek to influence voters during an election, Dr Johns said:

They do.17

1.44

The Committee received 102 submissions from the charity sector, together with a large number from individuals involved in the sector, which expressed concern that the regulatory burden in the proposed legislation would have a ‘chilling’ effect on their advocacy. The views of the charity sector are included in the report.

1.45

The Committee notes that charities are already subject to provisions in the Commonwealth Electoral Act 1918. These provisions require charities to authorise any broadcast of electoral material, and to make annual returns relating to political expenditure above the disclosure threshold ($13,500).

1.46

The ACNC provides advice on what is considered advocacy, what is considered political campaigning, and what is allowed under the Charities Act 2013.18

1.47

The Australian Electoral Commission (AEC) also provides guidance on submitting an annual return on all political expenditure over the donation threshold (currently $13,500).19 These are currently referred to as ‘third party’ returns. The Bill formalises this definition and clarifies who is covered by these provisions.

1.48

Consistent evidence has been provided to the Committee including from peak charity and philanthropic groups that many charities are unaware of their legal current obligations under the Electoral Act – obligations that have been in place since before the establishment of the ACNC.

1.49

The Committee heard a range of evidence from leaders of charities and not-for-profits that their campaigns seek to influence policy and in some cases elections. For example, Mr Marc Purcell, Chief Executive Office of the Australian Council for International Development (ACFID) stated:

We seek to raise public awareness and get better public policy because we believe in a democracy, yes.20

1.50

In regard to ACFID’s Campaign for Australian Aid, Mr Purcell informed the Committee:

We were trying to influence voters through the campaign all the time during an election period. … What I know is that we have policy calls and we ask major parties if they will meet those policy calls or not. The campaign does that, ACFID does that and any number of peak bodies do that. We will put some indication of whether the parties are going to raise aid or not and, if they are, whether they support a target or not. In using smiley faces—I remember that we were very careful when having that discussion we did not want to get into a position of ranking parties or anything like that. What we wanted to show was whether parties were going to meet our policy calls or not, and we wanted to do that in a simple, easily communicable way.21

1.51

Mr David Crosbie, Chief Executive Officer of the Community Council for Australia stated in response to charities seeking policy and political outcomes during an election period:

I think they seek a policy outcome, definitely, and I don't see them as separate.22

1.52

Mr Craig Wilkins, Chief Executive Officer of the Conservation Council of South Australia acknowledged election time is important for advocacy:

As part of our advocacy, as part of our mission, we see our role as highlighting issues and convincing the citizens of our state to hold a view that we share around the environmental and social future. So, absolutely, we see the essential role of advocacy is to inform and influence people in our state to care about the future of the environment.

1.53

Mr Wilkins further informed the Committee:

The election is a very important time, in terms of our political debate. It certainly sharpens minds. If we can advocate for a change in policy, a position, that advances our mission, then we feel like we are doing our job.23

1.54

Throughout the inquiry, it has been of concern to the Committee that possibly many thousands of charities are unaware of their current obligations under the Electoral Act.

1.55

It is apparent from a number of submissions received by the Committee that there is a degree of confusion amongst the charities sector about the impact of the proposed Bill on their activities, specifically whether a charity will be able to continue to receive foreign monies for its charitable purpose other than for political expenditure. This is not the case, the Bill specifically excludes charities from the prohibition on soliciting foreign funds, as long as these funds are not used for domestic political purposes.

1.56

The Bill’s proposals will not impact the majority of the some 55,000 charities operating in Australia. Those charities that currently have no requirement to provide third party returns under existing provisions of the Electoral Act will not be affected by the proposed amendments.

Conduct of inquiry

1.57

The Bill was referred on 6 December 2017 and the Committee called for submissions on 13 December 2017. A total of 203 submissions were received and are available on the Committee’s website.24

1.58

The Committee held four public hearings in relation to the Bill. Matters relating to the bill were also discussed at public hearings held in relation to the conduct of the 2016 federal election in January and February 2018. Transcripts of hearings for both inquiries are also available on the Committee’s website.

Structure of the report

1.59

Chapter 2 discusses the changes proposed for registration transparency, including the establishment of registers for all political actors, recognising new forms of political activism and the need to level the playing field.

1.60

Chapter 3 discusses the changes to financial transparency, public funding and foreign donations.

1.61

Chapter 4 concludes the report with a short discussion of the penalty regime proposed by the Bill.

1

Senator the Hon Mathias Cormann, Minister for Finance, correspondence dated 6 December 2017.
2

Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017, Explanatory Memorandum, p. 3.
3

Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017, Explanatory Memorandum, pp. 3-4.
4

See Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017, proposed s287(1); Explanatory Memorandum, pp. 11-16.
5

For further information see the inquiry website: <aph.gov.au/Parliamentary_Business/Committees/Joint/Electoral_Matters/2016Election>.
6

JSCEM, March 2017 (44th Parliament), Second Interim Report on the inquiry into the conduct of the 2016 federal election: Foreign Donations. Available at: <wwwaph.gov.au/Parliamentary_Business/Committees/Joint/Electoral_Matters/2016Election/Report_1>.
7

JSCEM, December 2011(43rd Parliament), Report on the funding of political parties and election campaigns. Available at: <aph.gov.au/Parliamentary_Business/Committees/House_of_Representatives_Committees?url=em/political%20funding/report.htm>.
8

National Security Legislation Amendment (Espionage and Foreign Interference) Bill 2017, Schedule 5, Part 2.
9

Dr Martin Drum, Private Capacity, Committee Hansard, 21 February 2018, Perth, p. 1. Evidence given to the 2016 Election inquiry.
10

Commonwealth Electoral Amendment (Donation Reform and Transparency) Bill 2016, Presented by Senator the Hon. Farrell, 28 November 2016.
11

Commonwealth Electoral Amendment (Political Donations and Other Measures) Bill 2016, Presented by Senator Rhiannon, 2 March 2016.
12

Dr Martin Drum, Private Capacity, Committee Hansard, 20 February 2018, Perth, p. 1. Evidence given to the 2016 Election inquiry.
13

Prof. George Williams, Private Capacity, Committee Hansard, 2 February 2018, Sydney, p. 11. Evidence given to the 2016 Election inquiry.
14

Dr Colleen Lewis, Director, the Accountability Round Table, Committee Hansard, 1 February 2018, Melbourne, p. 7. Evidence given to the 2016 Election inquiry.
15

Mr Malcolm Baalman, Private Capacity, Committee Hansard, 31 January 2018, Canberra, p. 6. Evidence given to the 2016 Election inquiry.
16

Dr Gary John, Australian Charities and Not-for-profits Commission (ACNC) Commissioner, Committee Hansard, 16 February 2018, Canberra, p. 26.
17

Dr Gary John, ACNC Commissioner, Committee Hansard, 16 February 2018, Canberra, p. 26.
18

ACNC, 16 April 2016, ‘Charities, elections and advocacy’. <acnc.gov.au/ACNC/Reg/Charities_elections_and_advocacy_.aspx>, accessed 21 March 2018.
19

Australian Electoral Commission (AEC), Third parties incurring political expenditure. Available at: <aec.gov.au/Parties_and_Representatives/financial_disclosure/guides/third-parties/index.htm>.
20

Mr Marc Purcell, CEO, the Australian Council for International Development, Committee Hansard, 31 January 2018, p. 14. Evidence given to the 2016 Election inquiry.
21

Mr Marc Purcell, CEO, the Australian Council for International Development, Committee Hansard, 31 January 2018, p. 16 - 17. Evidence given to the 2016 Election inquiry.
22

Mr David Crosbie, CEO, the Community Council for Australia, Committee Hansard, 31 January 2018, Canberra, p. 48. Evidence given to the 2016 Election inquiry.
23

Mr Craig Wilkins, CEO, the Conservation Council of South Australia, Committee Hansard, 19 February 2018, Adelaide, p. 1. Evidence given to the 2016 Election inquiry.
24

See: <www.aph.gov.au/em>.

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