Referral and conduct of the inquiry
1.1
On 19 September 2019, the House of Representatives Selection Committee referred the provisions of the Commonwealth Electoral Amendment (Real Time Disclosure of Political Donations) Bill 2019 (the Bill) to the Joint Standing Committee on Electoral Matters for inquiry and report.
1.2
Introduced in the House on 16 September 2019 by Ms Rebekha Sharkie MP, member for Mayo, the Bill amends the Commonwealth Electoral Act 1918 (the Act) to ‘require the agent or financial controller of the party, branch or campaigner to advise the electoral commission of any donation received by the party, branch or campaigner that meets or exceeds the disclosure threshold.’
1.3
In his speech on the Bill’s second reading, the member for Clark, Mr Andrew Wilkie MP, elaborated on the intent of the Bill, stating ‘every recipient of a donation at the federal level should be required to declare that donation in real time or at least within five days.’
1.4
The Committee advertised the inquiry on its website; issued a media release on 4 October 2019; and invited an array of stakeholders, groups and individuals to submit to the inquiry, including political parties, relevant Federal and State and Territory government departments, peak bodies, and industry groups and academics.
1.5
The Committee received 16 submissions from a range of organisations including advocacy groups, academics and concerned citizens.
1.6
The Committee thanks those individuals and organisations who contributed to the inquiry.
Purpose of the bill
1.7
The Bill consists of three clauses. The key provisions of the Bill include:
amending section 302V of the Act to include a reference to both an annual return and a notice;
amending the heading to section 305B of the Act to clarify that this provision relates to annual returns;
inserting a new section (305C) ‘which provides that political parties, State branches and political campaigners must provide a notice to the electoral commission as soon as practicable to do so and in any event no later than five working days after receipt of same’; and
amending ‘subsection 320(1) to provide for notices provided to the electoral commission to be published on the Transparency Register as soon as reasonably practicable after giving the notice.’
1.8
The Bill also introduces a penalty for failure to provide notice to the electoral commission of ‘60 penalty units or an amount that is three times the value of the donation.’
Current disclosure regime
1.9
Chapter 6 of the Committee’s Report on the conduct of the 2016 federal election and matters related thereto (the Report) provides an overview of past Electoral Matters Committee inquiries on political donations.
1.10
Paragraph 6.21 of the Report highlighted:
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.
1.11
According to the Australian Electoral Commission’s (AEC) website, the current disclosure scheme ‘requires candidates, Senate groups, political parties, political campaigners, associated entities, third parties and donors to lodge election or annual financial disclosure returns’ with the AEC.
1.12
The disclosure returns are available to the public either 24 weeks after polling day (in the case of election disclosure returns); or from the first working day in February for annual disclosure returns.
1.13
The following section provides a brief overview of the current annual and election disclosure requirements.
Annual disclosure
1.14
Section 314AB of the Act sets out the requirements that annual returns for political parties, associated entities and political campaigners for each financial year must include:
the total value of receipts;
details of amounts received that are more than the disclosure threshold;
the total value of payments;
the total value of debts as at 30 June;
details of debts outstanding as at 30 June that total more than the disclosure threshold; and
details of any discretionary benefits received from the Commonwealth, State or Territory.
1.15
Political campaigners have an additional requirement which they must include in their annual report: the total ‘amount of electoral expenditure incurred by, or with the authority of the campaigner.’
1.16
Annual reports for third parties must include:
total electoral expenditure incurred above the disclosure threshold;
details of gifts received for political expenditure of more than the disclosure threshold wholly or partly used to incur the political expenditure disclosed in the return; and
a signed statement of compliance with foreign donations restrictions.
1.17
The AEC’s website highlights that organisations and individual donors to political parties and political campaigners must disclose details of donations each financial year:
including gifts-in-kind, made to registered political parties or political campaigners totalling more than the disclosure threshold; and
donations of more than the disclosure threshold received and used (wholly or partly) to make the donations disclosed in the return.
Election disclosure
1.18
As noted above, candidates, unendorsed Senate groups and Senate groups endorsed by more than one registered political party must lodge election disclosure returns with the AEC. Election disclosure returns must show:
the total value of donations received;
the total number of donors;
all individual donations received above the disclosure threshold (personal gifts such as Christmas and birthday presents need not be disclosed);
the details of donations including:
the date on which each donation was received;
the amount or value of each donation;
the name and address of the donor;
the total amount of electoral expenditure incurred by or with the authority of the candidate or Senate group; and
details of any discretionary benefits received from the Commonwealth, a State or a Territory during the period of 12 months before polling day.
1.19
The AEC website adds: ‘People or organisations making donations to candidates or Senate groups in excess of the disclosure threshold must also lodge a donor return.’
Table 1.1: Disclosure of donations – Offences and penalties
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Failure to provide a return disclosing the value of gifts received – s304
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Candidate (including members of a group who were candidates) or the candidate’s agent
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Whichever is higher of:
– 60 penalty units, or
– three times the amount of the value of the gifts not disclosed (if there is sufficient evidence for the court to determine the amount, or an estimate of the amount, of the value of the gifts not disclosed) (s304(2))
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Failure to provide a return disclosing the value of gifts received – s304
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Agent of a group whose members were candidates
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Whichever is higher of:
– 60 penalty units, or
– three times the amount of the value of the gifts not disclosed (if there is sufficient evidence for the court to determine the amount, or an estimate of the amount, of the value of the gifts not disclosed) (s304(3))
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Failure to provide a return disclosing gifts valued at more than the disclosure threshold – s305A
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Donor who is not a political entity or an associated entity
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Whichever is higher of:
– 60 penalty units, or
– three times the amount of the value of the gifts not disclosed (if there is sufficient evidence for the court to determine the amount, or an estimate of the amount, of the value of the gifts not disclosed) (s305A(2))
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Failure to disclose gifts totalling more than the disclosure threshold in a financial year – s305B
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Donor who is not a political entity or an associated entity
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Whichever is higher of:
– 60 penalty units, or
– three times the amount of the value of the gifts not disclosed (if there is sufficient evidence for the court to determine the amount, or an estimate of the amount, of the value of the gifts not disclosed) (s305B(1))
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Source: Australian Electoral Commission, ‘Penalties relating to funding and disclosure regulations’, viewed on 29 October 2019, <https://www.aec.gov.au/Parties_and_Representatives/financial_disclosure/penalties.htm>.
Table 1.2: Annual returns – Offences and penalties
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Failure of a political party or political campaigner to provide an annual return – s314AB
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– Registered political party or its agent or its financial controller
– Political campaigner or its agent or its financial controller
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Whichever is higher of:
– 120 penalty units, or
– three times the value of the amount not disclosed (if there is sufficient evidence for the court to determine the amount, or an estimate of the amount, not disclosed) (s314AB(1))
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Failure of an associated entity to provide an annual return – s314AEA
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Associated entity or its financial controller
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Whichever is higher of:
– 60 penalty units, or
– three times the value of the amount not disclosed (if there is sufficient evidence for the court to determine the amount, or an estimate of the amount, not disclosed) (s 314AEA(1))
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Failure of third party to provide an annual return – s314AEB
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Third party
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Whichever is higher of:
– 60 penalty units, or
– three times the value of the amount not disclosed (if there is sufficient evidence for the court to determine the amount, or an estimate of the amount, not disclosed) (s314AEB(1))
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Source: Australian Electoral Commission, ‘Penalties relating to funding and disclosure regulations’, viewed on 29 October 2019, <https://www.aec.gov.au/Parties_and_Representatives/financial_disclosure/penalties.htm>.
Reform proposals put to this inquiry
1.20
A number of submitters supported the introduction of a real time disclosure framework.
1.21
For example, Mr Krystian Seibert from the Swinburne University of Technology stated:
I believe that this is a worthwhile reform, which would enhance the transparency of election funding of organisations with a high degree of involvement in the electoral process, including political campaigners.
1.22
The Public Health Association of Australia (PHAA) believed that the overall regulatory reform was desirable.
1.23
Associate Professor Luke Beck from Monash University suggested that a real time disclosure framework would be practical:
The current long delay before information about donations is made public frustrates the purposes of transparency and the avoidance of improper influence underlying a disclosure regime. Those purposes are promoted by real time reporting.
1.24
Dr Belinda M. Edwards from the University of New South Wales supported the legislation as an initial first step:
Moving towards more timely disclosures of gifts is a small but important initiative to improve transparency around political donations at the Federal Level.
1.25
The Human Rights Law Centre agreed that the proposed amendments to the Act were a step in the right direction:
Transparency and accountability with respect to the role that political donations play in our democracy is vital, and amendments to ensure that they are disclosed in real time is a step in the right direction. We commend the purpose of this Bill insofar as it applies to politicians and political parties subject to some significant concerns with the drafting of the Bill.
1.26
GetUp and the Australian Conservation Foundation both believed that the Bill would bring about greater transparency and help restoring restore community confidence in our political system.
1.27
The Australian Greens supported ‘the Bill’s objective of timely and accessible disclosure of donation data.’
1.28
The Uniting Church in Australia believed that a real time disclosure framework would help to inform voters:
Synod supports real time disclosure of donations to candidates and political parties. Real time disclosure is essential so voters know as they are deciding between political parties and candidates whom those parties and candidates are taking money from as this may be relevant to their decision making on whom to vote.
1.29
Adjunct Professor Dr Colleen Lewis commented that ‘real time disclosure is one of the most important reforms required to remedy a largely opaque political donations system that places personal and party interests well before the public interest.’
1.30
Dr Lewis argued that the Bill could have called for a shorter disclosure period:
…it is possible to declare donations within 24-48 hours. The technology exists and has for some time. The only thing that does not appear to exist is the political will to do so.
1.31
However, a number of submitters expressed concerns about the Bill.
Disclosure threshold and definition of gift
1.32
The disclosure threshold, the amount which donations must be disclosed, under the Commonwealth Electoral Act 1918 is Consumer Price Indexed (CPI) – and is currently $14,000.
1.33
Some submitters were concerned that the Bill could require the disclosure of all gifts, regardless of the amount.
1.34
Mr Seibert argued that the Bill could be amended to make it clearer that reporting should only be for amounts over the disclosure threshold:
… it would appear that the Bill would require reporting to the Australian Electoral Commission of any donation. For this reason, the section needs to be amended so that it applies to donations about the disclosure threshold […] and to situations where multiple smaller donations have been received during the year and the disclosure threshold is exceeded by these cumulative donations.
1.35
Cumulative donations, or making multiple gifts below the disclosure threshold, was also addressed by Dr Graeme Orr’s submission:
A donor, especially one advised by a party, could avoid early disclosure by donating below the threshold. […] The alternative regulatory option is for the disclosure obligation to be triggered whenever the threshold is exceeded cumulatively from one source, within the relevant period (currently a financial year). This is the case in some State systems.
1.36
In 2018, the Senate Select Committee into the Political Influence of Donations found $1,000 was the broadly agreed disclosure threshold. The Senate Select Committee recommended the Commonwealth Electoral Act 1918 be amended to introduce a fixed disclosure threshold of $1,000 to be calculated over a whole party group.
Regulation of political campaigners and associated entities
1.37
Political campaigners are entities consisting of individuals and organisations (who aren’t parties or candidates) that incur substantial amounts of electoral expenditure.
1.38
Examples include charities, not-for-profits, industry groups and corporations.
1.39
Associated entities are organisations that are controlled by a political party or operate for a significant extent for the benefit of a political party.
1.40
Political campaigners and associated entities must register with the Australian Electoral Commission’s Transparency Register in order to accept political donations or incur electoral expenditure.
1.41
Many political campaigners may also be registered charities. These groups may also undertake non-political activities as their core business (for example, broad themes such as poverty reduction or health promotion that are not limited to the election cycle). These organisations may receive donations for non-political purposes. The Committee received evidence arguing for a clearer distinction between the different types of donations a political campaigner organisation might receive:
Donations raised or given to a charity or not-for-profit entity for purposes that do not involve electoral expenditure should not be captured by this Bill. The Bill should be amended to reflect this. There should be no penalties for an entity that uses a donation for electoral expenditure where the donation was not raised or given for that purpose, to the extent that such laws do not already exist.
1.42
The Human Rights Law Centre argued that the Bill should not apply to political campaigners, as it will result in the unequal treatment between charities or not-for-profits and corporations or industry groups:
Industry groups like the Business Council of Australia […] are among the biggest spenders in Australian elections. However, as they rely on membership fees and other forms of income not captured by the definition of ‘gift’ in the Act, they would not be impacted by this Bill.
Only charities and not-for-profits rely on donations. Charities, which are bound by law to advocate for the public benefit and in accordance with their charitable purposes, should not have more restrictions imposed on them than profit motivated industry groups and corporations.
Administrative burden
1.43
A number of submitters also expressed concern about the potential administrative burden of a real time disclosure framework.
If the Bill intends all gifts be disclosed in real time that would have major ramifications for the system: especially for small donor privacy and the administrative burden on parties and the AEC.
1.45
The Northern Territory Electoral Commission noted:
Smaller political parties are more likely to struggle to meet real time disclosure obligations and any such system needs to consider their capacity to comply.
1.46
GetUp, who is classified as a political campaigner, said:
… while GetUp is in a position to comply with reasonable administrative workloads related to real time disclosure, it must be noted that smaller organisations, especially charities whose main focus is not political campaigning, may struggle.
1.47
The Liberal Party did not support the Bill:
The Liberal Party does not support changes to these arrangements that would unnecessarily add to the already considerable administrative and compliance burdens placed on political parties. The Liberal Party does not support changes which fail to recognise that political parties are broad-based organisations with large volunteer wings and limited resources.
1.48
The Uniting Church in Australia said that ‘such measures must be balanced and should not impose regulatory burdens that are disproportionate to the benefits obtained by the greater transparency.’
1.49
Adjunct Professor Lewis suggested that a real time disclosure framework could result in the Australian public agreeing to additional funding to the Australian Electoral Commission:
…it is highly doubtful that the Australian Community would object to paying for greater transparency and openness in the political donations regime.
Additional issues
1.50
Currently, there are different disclosure threshold and reporting rules across each State and Territory. The disconnect between jurisdictions is highlighted with this example:
… a property developer cannot donate to campaigns of any level of government in QLD, can only donate to federal campaigns in NSW, and can donate to federal (any amount) or state (capped at $4,000) campaigns in Victoria. A donation of $5,000 is illegal if it is for a state campaign, must be declared weekly in QLD for a state or federal campaign and does not need to be declared at all in Tasmania.
1.51
The Australian Greens called for the disclosure amount to be closer to what is applicable in the state jurisdictions:
… a reasonable balance is struck between transparency and privacy when disclosure obligations are only imposed on donations totalling over $1,000. This reporting threshold is consistent with that applying in a number of state jurisdictions.
1.52
Other submitters also suggested that further reform was needed to fix these inconsistencies and make the disclosure system effective.
1.53
The Northern Territory Electoral Commission suggested ‘developing one national disclosure reporting portal where political parties can meet both their federal and State/Territory political donations reporting obligations’.
Committee comment
1.54
The Committee notes the following problems with the Bill:
The requirement of the disclosure of all gifts regardless of the amount;
That the definition of gift does not capture sponsorship or membership fees;
Proposed section 305C does not cover candidates and associated entities;
It does not factor in the additional expense of compliance; and
It will place additional burdens on the Australian Electoral Commission.
1.55
On 27 November 2018, the Government passed the Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Act 2018. In November 2020, the Committee will be undertaking a review of this new legislation, including further examination of real time disclosure of political donations.
1.56
The Committee recommends that the bill not be passed.
1.57
Senator the Hon James McGrath