Introduction
2.1
This chapter examines key issues discussed by submitters. In particular, it will consider:
support for the bill, including recommendations to improve the operation of the bill and proposals for additional enhancements to the federal funding and disclosure regime;
opposition to the bill; and
challenges in implementing the measures proposed by the bill, including the additional financial and human resources that may be required.
2.2
The chapter concludes with the committee's views and recommendation.
Support for the bill
General views
2.3
The majority of submitters expressed support for the measures in the bill. Many of the submissions were from either politically active organisations or taxpayer-sponsored entities; however, it appears only a few of these organisations have direct experience complying with electoral law funding and disclosure obligations. It is also important to note that the committee received relatively few submissions in total. Generally, these submitters considered that the proposed measures would enhance transparency and accountability in relation to political funding and expenditure, and help bring the federal political finance regime into line with other jurisdictions. However, a number of submissions that engaged with the detail revealed fundamental problems with the bill.
2.4
Ms Danielle Wood, Chief Executive Officer of the Grattan Institute, asserted that the measures in the bill were 'both a necessary and obvious step to improve the transparency of the donations regime'.
2.5
A number of submitters and witnesses expressing support for the bill also noted the potential for donations to 'buy' political influence and impact democratic processes.
2.6
For example, the Human Rights Law Centre (HRLC) asserted that donations and gifts may secure access to politicians that would not otherwise be available, and that donations may encourage officeholders to 'decide issues….according to the wishes of those who have made large financial contributions'. Such statements were usually presented as supposition. Whilst such claims could amount to allegations of corrupt or criminal conduct, these very serious charges were however not backed in with evidence of systemic cases arising at the federal political level.
2.7
When queried on why it is problematic when individuals use money to buy political influence, Professor AJ Brown, leader of the Griffith University Centre for Governance and Public Policy's public integrity and anti-corruption research program, explained:
I think the key question is one of fairness. It's both transparency of access, which is what your bill goes to directly, but it's also, ultimately, the fairness of the fact that not every Australian can buy that access. The more money that flows into a system, obviously, the more access it will implicitly or explicitly buy. So, fundamentally, it comes down to a question of fairness and whether that then distorts the right of all Australians as individuals to participate in the political debate in a fair way…
2.8
Submitters also highlighted the impact of donations on public perceptions of democratic processes and institutions. For example, Dr Bruce Baer Arnold, an Assistant Professor at the University of Canberra Law School, observed that – based on data that preceded the onset of the COVID pandemic – popular cynicism towards politicians had been on the steady continued rise:
The 2019 Australian National University 2019 Australian Election Study…reported that satisfaction with democracy is at its lowest level since the constitutional crisis of the 1970s, with trust in government having reached its lowest level on record.
2.9
According to the Grattan Institute, key gaps in the political finance regime include:
a high disclosure threshold;
no aggregation of donations from the same donor; and
long delays between when a donation is made and when it is disclosed to the public.
2.10
Some of criticisms of the existing legal framework could have been more readily accepted without critical examination, were they made to another body rather than to a parliamentary committee whose members have some familiarity with electoral laws. The committee notes that the Commonwealth Electoral Act contains a number of provisions requiring aggregation of donations that exceed the disclosure threshold. For instance, section 314AC specifically requires political parties and political campaigners to aggregate certain sums received, and section 305B requires a donor to aggregate amounts to the same entity if those gifts total more than the disclosure threshold. There are however valid issues raised about the asymmetry between some of these provisions. But the focus of the present inquiry is on the content of the bill, rather than the Act.
2.11
Submitters that supported the measures in the bill also highlighted disparities between the federal political finance regime and regimes in the states and territories. For example, Darebin Climate Action Now (DCAN) observed that:
Victoria and New South Wales (NSW) require donations of $1 000 or more to be disclosed within 21 days, while Queensland requires 'real time' disclosure; and
in Victoria, donations are capped at $4 000, with public funding for election campaigns increased—thus reducing parties' reliance on larger contributions.
2.12
The Accountability Round Table (ART) also highlighted differences between the federal regime and regimes in overseas jurisdictions. ART drew comparisons between the federal regime and relevant provisions in Canadian, New Zealand and United Kingdom (UK) legislation, contending that those jurisdictions apply more stringent funding and disclosure obligations.
2.13
Several submitters that supported the bill also suggested amendments to the proposed measures, and recommended additional changes to the funding and disclosure regime. These matters are outlined below, grouped under headings reflecting the schedules in the bill.
Schedule 1—Disclosing gifts and donations
Amount of the proposed disclosure threshold
2.14
The majority of submitters supported the proposal to lower the threshold for disclosing donations and gifts. However, there were divergent views among submitters as to the amount at which the threshold should be set.
2.15
In this respect, some submitters expressed support for a disclosure threshold of $2 500, while others argued for a lower threshold – which would curtail the privacy of those who want to contribute to public policy debate through the electoral system. For example, the ART stated that the disclosure threshold should be lowered to $1 000, noting that this would bring the federal disclosure threshold into line with thresholds in other jurisdictions. A threshold of $1 000 was also proposed by the CPI and by Mr Ange Kenos. Limited reflection was provided by submitters about the efficacy of communications between candidates and voters in a vibrant democracy. At a time when growing diversity of media channels makes it more costly to communicate with the general public, it was not clear why it would be wise to make it more difficult for political parties and other advocates to participate in public debate.
2.16
Other submitters called for a higher disclosure threshold than is proposed by the bill. For example, DCAN called for the threshold to be set at $5 000. The East Melbourne Climate Alliance (EMCA) also supported a disclosure threshold of $5 000, stating that donations of $5 000 or more are 'big enough to make a difference'. Submissions that proposed specific figures generally lacked analysis to explain how a proposed figure was calculated or selected, or to explain why it should be preferred over any other figure.
2.17
In addition, submitters generally supported requiring aggregation of donations from the same donor, noting that such a requirement would help ensure that larger donors could not hide their identity by 'splitting' their political donations.
Implications of the proposed disclosure threshold for smaller entities and groups
2.18
Under the Electoral Act, a person or entity will be classified as a 'third party' if the amount of electoral expenditure incurred by that person or entity during the financial year exceeds the disclosure threshold. To be classified as a third party, the person or entity must not be registered as a political campaigner for the relevant financial year.
2.19
With regard to this matter, submitters expressed concern as to the implications of a lower disclosure for small community groups. For example, the HRLC noted that lowering the disclosure threshold from $14 000 per year to $2 500 per six months would significantly lower the threshold at which an entity becomes a third party. The HRLC expressed concern that this would expose small, grassroots community groups to onerous reporting requirements. This critique highlights the fact that the curtailment of the rights of politically-interested persons can have impacts on a range of players, including small and medium organisations. Dollar-based policy settings are agnostic as to the characteristics of a donor and can therefore impact non-profit entities in common with commercial entities.
2.20
Professor Graeme Orr, who researches the law of elections and politics at the University of Queensland and appeared before the committee in a private capacity, identified that the bill could have 'serious impacts' on third parties which he noted seemed to be 'an unintended consequence of the drafting'. Regardless of the intention behind the bill, detailed assessments of the bill revealed that restrictive impacts on politically active organisations are indeed the central and distinguishing characteristic of the bill.
2.21
Professor Anne Twomey, a professor of constitutional law who gave evidence in a private capacity, also raised the matter of third-party campaigners, noting that the bill as currently drafted would pick up a lot of small, low‑level community groups.
2.22
Professor Twomey provided further detail on why this could be problematic, and suggested that the bill should ensure it was targeting the right groups in the right way, and not targeting those groups engaged in little to no political campaigning. Professor Twomey continued that:
One of the problems with the bill is that the definitions that you've got there, for example, the definition of gift, is so broad that it would pick up any donation… So, if you're a community group or whatever you may be receiving donations for rehabilitating the local Landcare area or something or other and 90 per cent of the money you get is actually used for doing that stuff and there's only a small proportion of the money that you receive that is actually used for political campaigning. What you're trying to do is capture that so that it gets declared.
2.23
Professor Twomey explained that the reporting requirements in the bill may discourage small community groups from participating in political campaigning:
You've just got to be a bit careful not to tie them [small community groups] up completely in bureaucracy, because this stuff is fine if you're a big political party or you're a big organisation or even one of those political campaigners that whack in huge amounts of money. They've all got the infrastructure to deal with this stuff, and that's okay, but the amount of reporting requirements et cetera would completely freak out most community groups to the point where they say: 'Okay, that's way too hard. I'm never going to get involved in any political campaigning interaction at all.'
2.24
She further noted the possibly detrimental impact that this would have on the Australian political landscape:
It just takes them [small community groups] completely out of the system, which the Americans would say is chilling free speech. Here it just means a lack of diversity in views in the system if you make it so hard that no-one, unless they're really well resourced, is prepared to do it. You need to take that into consideration—target it only at the expenditure that's actually on political communication or campaigning and just narrow it down that way, but certainly not in such a way as to allow people free rein to spend whatever they like and never get to declare. I'm not suggesting that at all, just a little bit more tapering to solve the problems.
2.25
The HRLC recommended that the bill be amended to decouple the disclosure threshold from the threshold at which a person or entity becomes a third party, and to maintain the 'spending' threshold for third parties at $14 000.
2.26
The HRLC also expressed concern that the bill would require third parties not registered as charities to disclose all their income and donations, regardless of whether these were used to incur electoral expenditure. The HRLC asserted that such broad disclosure imposes an 'enormous burden' on local groups, while providing little, if any, public interest benefit. It recommended that the bill be amended to retain a disclosure threshold of $14 000 for third parties; to only require disclosure of donations which are electorally relevant; and not require third parties to disclose all their income, spending and debts.
2.27
The HRLC's concerns and recommendations were echoed by the Australian Conservation Foundation (ACF) and by GetUp. For example, on the matter of decoupling the thresholds, the ACF set out its reasons for supporting the recommendation as follows:
We also know this bill introduces a lot of administration requirements on any entity that is participating in an election. It's about finding the right balance. We don't want to capture the smallest third parties, such as community groups, that are often volunteer-run and might be working on a unique issue in an election that then have all of the quite burdensome administrative requirements for what might be one or two newspaper advertisements. You probably wouldn't even get an ad in a paper for $2,500—maybe a small local newspaper. The purpose of decoupling them is to protect community groups so we have diverse voices and diverse participation at election time. Decoupling the raising of thresholds is one of the easiest and clearest ways to do that.
2.28
The Electoral Commission of Queensland (ECQ) was of the view that the disclosure threshold should be standardised across the country, noting that 'variable' thresholds may affect stakeholders that operate across jurisdictions.
Disclosure of donations and gifts within seven days
2.29
The majority of submitters that supported the bill also expressed support for the requirement for reporting entities to disclose donations and gifts within seven days. Submitters noted that this requirement:
would help bring federal funding and disclosure requirements into line with other jurisdictions; and
would be consistent with Australia's international obligations.
2.30
By contrast, the Child Protection Party (CPP) expressed concern that the requirement to report donations and gifts within seven days could have a negative impact on minor parties due to their limited human resources. The CPP proposed that the seven day reporting requirement should apply only to major parties, with minor parties required to report donations and gifts at the end of each month.
2.31
The CPP also asserted that government must provide a secure web interface through which donors and recipients could easily update their records. It stated that to do otherwise could significantly increase the workload of party treasurers and their deputies, and pointed to the interface used by the Electoral Commission of South Australia as a good example of what CPP believes the AEC should provide. This submission did not reflect on the outdated nature of the AEC's technological infrastructure and the serious constraints on the AEC's capacity to implement system changes in the near-term. Those constraints have been recognised in the most recent federal Budget, when the Government provided $96.7 million over three years to start the first tranche of an overhaul of legacy systems that are at end-of-life.
Expanding the definition of 'gift'
2.32
A number of submitters that expressed support for the bill also supported the proposal to expand the definition of 'gift'. Some also suggested amendments to the definition, to ensure that all relevant donations and gifts are captured, and to avoid adverse consequences for affected stakeholders.
2.33
For example, the ART stated that the proposal to expand the definition of 'gift' was 'long overdue'. However, it observed that there was some uncertainty as to what was captured by the definition proposed by the bill. The ART indicated that the definition of gift should be broadened to also capture amounts or arrangements that are not conceptually gifts, including:
goods or services (other than volunteer labour) provided in-kind, i.e. for no consideration or for inadequate consideration, or
subscriptions paid to a registered political party or associated entity (including affiliation fees) for membership services.
2.34
GetUp asserted that corporations may make 'massive, undisclosed donations in the guise of membership fees' to industry bodies, and urged amendments to the bill to require disclosure of these membership fees as gifts. Under the Commonwealth Electoral Act a gift includes a disposition of property without adequate consideration, therefore under current law any part of a subscription that exceeds the value of membership services provided is already legally captured as a political donation (and is therefore subject to laws around disclosure, foreign donations, et cetera).
2.35
However, the CPP asserted that, rather than requiring disclosure of all membership fees, the bill should only require disclosure of fees over a specified amount. The CPP stated that 'blanket' reporting requirements would have a negative impact on minor parties due to their limited human and financial resources.
2.36
The Grattan Institute stated that donations and gifts above the disclosure threshold should be itemised into meaningful categories, and asserted that income from fundraising events should be categorised separately from 'other receipts'. It also asserted that loans should be separated from 'other receipts', and the terms and conditions of loans should be reported.
Schedule 2—AEC Disclosure Portal
2.37
A small number of submitters made comments relating to the bill's proposed establishment of an AEC Disclosure Portal. One submitter—Dr Bruce Baer Arnold—commended the establishment of the portal. Others submitters expressed more qualified support for the AEC Disclosure Portal proposed in the bill.
2.38
More broadly, at the public hearing a number of submitters expressed support for the general principle of a portal system that utilises technology to make the disclosure process easier.
2.39
For example, Professor Twomey observed that while she thought the idea of a portal had merit, there were technical problems within the bill which would need to be worked through in order to clarify how the portal would function. She explained:
…I found difficulty in trying to marry up using the portal for the purposes of disclosure and using the portal for the purposes of sticking the money into the account for the purposes of spending on Commonwealth campaigning. It wasn't very clear to me. It implied that any money that you got that you declared then had to go into the portal. That wouldn't make sense because if you're a third-party campaigner you're getting money for something else that you're not wanting to use for campaigning and it shouldn't go into the portal, even though you might still have to declare it.
2.40
The ART observed that the AEC Disclosure Portal was consistent with Australia's commitments as a member of the international Open Government Partnership (OGP). However, it shared the concerns expressed by the Senate Standing Committee for the Scrutiny of Bills (Scrutiny Committee) that the bill would leave key aspects of the disclosure portal to delegated legislation. The ART therefore endorsed a disclosure portal modelled on those successfully created in other jurisdictions.
2.41
GetUp expressed support for the AEC Disclosure Portal as a way of easing compliance burdens. However, it did not support the portal acting as a 'funnel' for donations and gifts.
2.42
The ANU Law Reform and Social Justice Research Hub (ANU Research Hub) raised concerns regarding the 'electoral expenditure purpose' of the Portal, stating that it was unclear whether the bill intended the AEC to hold electoral expenditure funds, or merely to act as a node between private accounts. The ANU Research Hub also noted comments by the Scrutiny Committee that the legislative framework for the portal relies heavily on delegated legislation that is not yet made. It noted that, without the inclusion of further detail on the face of the bill, the function of the portal was unclear and open to interpretation.
2.43
Ultimately, the ANU Research Hub stated that the bill requires a clearer, more comprehensive explanation of the 'electoral expenditure purpose' of the portal, and the inclusion of further detail regarding the portal's scope and operation.
Electoral expenditure accounts
2.44
GetUp expressed strong opposition to the proposal to require separate expenditure accounts, stating that the proposed requirements are:
….not only unnecessary and illogical, but..[make] compliance with the law practicably impossible at worst or impractical and ridiculously onerous at best. All the aims of the bill can be achieved without the requirement for separate bank accounts.
2.45
GetUp also expressed its opposition to the proposal for the AEC to administer reporting entities' bank accounts.
Schedule 3—Reforming returns
2.46
A number of submitters supported the proposal to require returns every six months, rather than on an annual basis. However, some asserted that the proposal did not go far enough in terms of ensuring up-to-date financial data.
2.47
For example, the ART observed that half-yearly returns seemed 'unnecessarily infrequent', given that IT systems can easily enable the assembly, analysis, transmission and reporting of financial data. The ART recommended that returns be lodged every three months, noting that this would be consistent with Australia's commitments as a member of the OGP. They did not explain how the burden of high frequency reporting could be met by the smallest politically active organisations, that rely on volunteers and who do not have the resources to engage professional staff. Nor was it evident who would consume high frequency data or how it would be used, to demonstrate that there are benefits that outweigh the costs imposed on others.
2.48
By contrast, the Republican Party of Australia (RPA) expressed opposition to half-yearly returns, stating that this would be an 'unnecessary impost' for minority political parties. Those who are engaged in political activity as opposed to those who observe it and criticise from the sidelines, are more cognisant of the challenges inherent in being an active participant in a democracy.
2.49
In addition to these views, the Grattan Institute noted that to be useful, donations information must be readily accessible. It recommended that the AEC release summary documents at the end of a disclosure period, as occurs in some jurisdictions.
Schedule 4—Monitoring and investigation powers
2.50
Few submitters commented on the proposal to expand the monitoring and investigation powers available to the AEC. Submitters that did make comments generally supported the proposal, noting for example that regulatory regimes are only as effective as the enforcement mechanisms in place.
2.51
However, some submitters raised concerns regarding the cost of implementing the measures proposed by the bill—including costs associated with increased compliance activity by the AEC. These concerns are detailed later in this chapter. Compliance activity of course entails costs both for organisations that have to respond to regulator inquiries, as well as costs to the regulator (taxpayer costs). It is therefore necessary that the benefits of regulatory imposts must be demonstrably proportionate to those costs.
Proposed civil penalty—providing false or misleading information
2.52
The ART argued that the penalty for providing a false or misleading return (300 penalty units) was 'trifling', and was unlikely to act as a significant deterrent. It asserted that providing a false or misleading return should be an offence attracting custodial and financial penalties. This critique did not have any regard to the chilling impact that custodial penalties might have where there is inadvertent omission or error in an organisation that depends upon volunteer effort, or decentralised processes to raise and spend funds.
Schedule 5—Anonymous gifts
2.53
Some evidence was received regarding the proposal to permit anonymous gifts of $500 or less, subject to certain conditions.
2.54
For example, the RPA stated that it agreed with permitting anonymous gifts, so long as the gift did not exceed the prescribed threshold. GetUp supported lowering the threshold for permitted anonymous gifts, and asserted that the threshold should be further lowered to $100—in line with other jurisdictions.
2.55
By contrast, the CPP asserted that all gifts and donations should be reported, and the donor be identified. The CPP stated that disallowing anonymity would make the political funding system more open and transparent, thereby leading to an increase in public confidence in the political system. This proposal is an outlier suggestion that does not resemble the laws of any jurisdiction known to the committee and would expose the smallest contributors to political debate to public scrutiny.
Other matters
Caps on donations
2.56
Some submitters expressed the view that donation reform should go beyond disclosure, and caps should be imposed on the amounts that may be donated.
2.57
For example, Australians for Refunds on Cans and Bottles (AFROCAB) stated that donations should be limited to $1 000 per person or per industry, per year. AFROCAB expressed the view that imposing such a cap would create a 'level playing field' between corporate interests and community organisations, noting that community organisations rarely have access to the resources that are often available to business groups.
2.58
The CPP also supported a cap on donations. However, the CPP asserted that donations should be limited to $10 000 for personal donations, and $100 000 for donations from organisations. Like disclosure threshold proposals, there was a lack of methodology or rationale for selection of such figures. Hence the figures that were proposed for caps were inevitably rounded, emblematic of their arbitrary character.
2.59
By contrast, the RPA asserted that there was 'no rhyme or reason' why there should be a limit on the amount that may be donated to a registered political party, provided donations were disclosed in the appropriate manner and form.
Caps on electoral expenditure
2.60
Some submitters argued for caps on expenditure during campaigns, to guard against the risk of a small number of donors having a disproportionate impact on electoral outcomes or political decisions. The Grattan Institute in particular strongly supported limits on electoral expenditure, stating that:
[U]ltimately, transparency alone is not enough to protect Australia's democracy from the influence of a handful of wealthy individuals. To reduce the influence of money in politics, parliament should introduce an expenditure cap during election campaigns. Capping political expenditure would limit the influence of individual donors and reduce the 'arms race' for more donations between the major parties.
2.61
Support for limits on electoral expenditure was also apparent in submissions from DCAN, the ART, GetUp and the EMCA. Some of these organisations are very politically active, but did not themselves comment on the potential for alliances to be used to get around caps when organisations act in concert (whether those alliances are formalised or tacit).
Donations from specific persons, entities and industries
2.62
Some submitters argued that specific persons, entities and groups should be prohibited from making political donations, while wanting political liberties to be unimpaired for political organisations who shared their worldview. For example, the Sustainable Australia Party (SAP) noted that NSW and Queensland prohibit donations from property developers and other interests. The SAP argued that donations from property developers should likewise be prohibited at the national level, stating that this would:
…prevent developers seeking to get around the State bans by making donations to the Federal branch of the…political party whose policies they are seeking to influence.
2.63
The RPA asserted that only eligible Australian citizens should be permitted to make donations to registered political parties, noting that this would mean 'corporate organisations, lobby groups, industry associations, unions and the like' would not be permitted to make donations. While this suggestion has conceptual neatness, it does not address the potential for backdoor donations through individuals from banned donors. Nor did it address the implied freedom of political communication in the Commonwealth Constitution and whether that freedom extends beyond individuals to associations of persons who hold shared views and have an interest in public affairs.
2.64
The Public Health Association of Australia (PHAA) also supported prohibiting donations from particular industries and groups. The PHAA noted that there was currently a bill before the Parliament that seeks to make it unlawful for certain businesses (such as members of the tobacco and gambling industries) to make political donations. The PHAA expressed the view that this would complement the 'highly desirable' policy direction taken by some State Parliaments. This view highlights a risk with some proposals around constraints on free speech: often the advocates for suppression want to remove the rights for their opponents to have a voice in public debate. Such proposals need to be considered dispassionately and with a sense of responsibility.
2.65
Other submitters expressed concern in relation to the influence of donations from specific interests, without calling for a ban on donations from the relevant industries. For example, DCAN was of the view that donations from fossil fuel interests 'dominated' the last federal election campaign, and expressed concern as to the influence of these donations on political decisions and electoral outcomes. If this view was taken to its logical end, the law would need to be adjusted after every election to limit the remaining voices in public debate if any donor groups are perceived to become the new 'dominant' influence.
Implied freedom of political communication
2.66
Two submitters commented on the interaction between the measures in the bill and the implied constitutional freedom of political communication.
2.67
The ANU Research Hub stated that the measures in the bill may 'burden' the implied freedom of political communication by discouraging entities from making donations. The Research Hub further noted that the bill would not limit the ability of persons and entities make donations, but would lower the threshold for the identification of donors. Ultimately, the ANU Research Hub asserted that the bill required a clearer, more comprehensive explanation of why it did not impermissibly burden freedom of political communication.
2.68
Conversely, Dr Arnold stated that the bill was not contrary to the implied freedom of political communication, noting that the bill does not preclude entities from making donations, but instead updates applicable reporting requirements.
2.69
It was not acknowledged that the outing of donors impacts privacy in relation to a person's political views. This can expose a person to harassment and indeed individuals may therefore be intimidated away from further political participation as a result. Those who advocated greater disclosure of political beliefs of other persons did not provide particular insight about the contemporary phenomenon of 'cancel culture' tactics (tactics adopted by some political activists as a more acute form of personally-destructive harassment).
Opposition to the bill
2.70
While some submitters identified impractical effects of the bill that would have a chilling effect on small political players, other players more overtly proposed that the Parliament should oppose the bill altogether. In particular, the Liberal Party of Australia (Liberal Party) noted that political parties and other entities are already subject to a rigorous funding and disclosure regime, which has been in place under a number of successive governments.
2.71
The Liberal Party emphasised that it did not support changes to the regime that would unnecessarily add to the administrative and compliance burdens imposed on political parties, nor changes which fail to recognise that parties are broad organisations with large volunteer wings and limited resources.
2.72
Ms Robyn Nolan echoed the Liberal Party's views, and in addition noted that there was already a funding and disclosure regime in place under the Electoral Act. Ms Nolan asserted that the measures proposed by the bill were 'excessively harsh and severe', and would impose 'impossible' requirements on political parties and other entities. Ms Nolan stated that the bill in its current form should not be passed, and the current funding and disclosure system retained.
Challenges in implementing the proposed measures
2.73
Some submitters noted that implementing the measures in the bill may be a costly and labour-intensive exercise, and expressed concern as to the mistaken assertion in the Financial Impact Statement that any additional expenditure required of the AEC could be met from within existing appropriations.
2.74
In particular, the AEC observed that—from an administrative perspective—the measures in the bill would likely require several changes to the AEC's administrative processes and IT systems, with associated financial impacts. The AEC expressed concern about the proposal that it manage the administration of electoral expenditure accounts, noting that that this would add cost and complexity to its functions. In addition, the AEC expressed concern that its independence may be perceived as compromised if it were to have a decision‑making role in distributing funds to political parties for campaign purposes.
2.75
The ANU Research Hub raised similar concerns and noted that giving the AEC a role in the administration of electoral funding and expenditure would create opportunities for the AEC's independence to be questioned. The ANU Research Hub also took issue with the assumption that no additional expenditure would be required to implement the measures, stating that:
[I]f passed, section…302AD would significantly expand the role of the AEC. As such, the creation of an adequately constructed and maintained Disclosure Portal would have a significant financial impact and would very likely require additional AEC resources.
2.76
The Community and Public Sector Union (CPSU) also raised concerns about the assumption that any additional expenditure required of the AEC could conceivably be met from within existing resources. It argued that properly implementing the measures in the bill would increase the compliance duties of the AEC and would require additional resources if the AEC's ongoing work was not to be affected. As a public sector union, the CPSU has understanding of the finite nature of public finances and their nexus to existing legislative or administrative responsibilities. The CPSU is also conscious that diversion of resources to meet new demands could have impacts for the job security of their members.
2.77
The CPSU further expressed the view that the AEC had experienced funding pressures, and had been forced to reduce its staffing levels to meet Average Staffing Level targets. The CPSU asserted that while greater transparency was in the public interest, any strengthening of the political finance regime must be met by additional resourcing for the AEC and the end of 'arbitrary' staffing caps.
2.78
The ECQ noted that lowering the disclosure threshold would increase the volume of gifts that an electoral body must process—thereby increasing that body's administrative requirements and compliance activity. It also emphasised that timeframes for making changes to disclosure thresholds must be clearly communicated to stakeholders.
2.79
The ECQ also informed the committee that establishing and administering an online disclosure system requires significant resources. The ECQ is the electoral system administrator for Australia's third largest state and has recent experience in building complex ICT systems, having completed major new investment in early 2020. Mr Wade Lewis, Assistant Electoral Commissioner for the ECQ observed that 'these systems don't build themselves' and that:
They do come at a cost, in terms of building them and maintaining them. They actually require…a team of quite savvy people to use and administer the system, and a team of people who are skilled in stakeholder engagement to work with a whole range of stakeholders to ensure that they understand the system and are capable of engaging with it in a way that ensures they are compliant with the regulatory regime that they are working under.
Committee view
2.80
In the committee's view, Australian democracy is best served by a fair, transparent and open political system, and by elected representatives who act in the public interest in the performance of their duties. The committee appreciates that—unless properly regulated—donations and gifts have the potential to influence political actors and decisions, and to reduce public trust in democratic processes and institutions.
2.81
At the Commonwealth level, there is already an effective regime in place to regulate political donations. This regime is set out in the Electoral Act, and requires both donors and recipients of donations to disclose the details of donations and gifts to the AEC.
2.82
Ultimately, the regime aims to increase overall transparency in relation to political donations and expenditure, and to reduce the risk of corruption.
2.83
The committee acknowledges that some sectors of the community have raised concerns, both in this inquiry and in other forums, as to the adequacy of the current political finance regime. While this inquiry received few submissions, most were from politically active organisations and taxpayer-subsidised bodies. Many of those calling for more aggressive laws are themselves political actors and one theme was a desire by some of these actors to curtail the rights of their opponents, limit their activities and remove the personal privacy of their private financial supporters.
2.84
Other submitters were aware of the deleterious impact on Australian democracy from features of the bill that were overly punitive and constrictive. A common concern was the harmful effect that the bill would have on small and medium players.
2.85
While several submitters have expressed support for the proposals in the bill, and have suggested additional changes to the political finance regime, on balance the committee is satisfied that the current regime under the Electoral Act is generally effective and serves its purpose without the overbearing amendments proposed by this bill.
2.86
In addition, there appear to be several divergent views reflected as to the most effective and appropriate means of reforming the political finance regime. In regard to the measures proposed in the bill, the committee notes that there is disagreement as to the amount at which the disclosure threshold should be set; how frequently disclosures should be made; and how funding and disclosure processes should be administered. Different settings proposed in submissions lacked a clear or compelling basis for how they were arrived at or why they were preferable to competing suggestions, both on principle and in regards to methodology.
Specific policy issues
2.87
One of the amendments in the bill would require parties to establish an electoral expenditure account. The committee recognises value in this proposal, but notes that since the introduction of the bill, a similar reform was already enacted in the Government's Electoral Legislation Amendment (Miscellaneous Measures) Act 2020. Those changes reflect recommendations from the Joint Standing Committee on Electoral Matters and are included in new sections 302CA and 314B of the Electoral Act and in the definition of 'federal account' at subsection 287(1). Exclusive coverage of federal donations under federal electoral law is now conditional on whether political actors use federal campaign bank accounts.
2.88
The bill proposes allowing donors to make anonymous gifts of $500 at events (per person, per event). This could be criticised for being a new loophole in the Electoral Act, that would be quite significant if it is exploited aggressively by organisations that would otherwise face disclosure obligations. This does not align with the existing $100 limit in the Electoral Act for 'cash bucket' donations, which is the level at which a political party does not need to check whether a donor is foreign (section 302F). Were the bill to be enacted, it would create internal tensions within the electoral law. The committee considers it would be very imprudent to lift the $100 threshold related to foreign donation checks, given that foreign interference remains a very serious concern.
2.89
The bill proposes lowering the disclosure threshold to $2 500 in a 6 month period. This would expose small donors to potential intimidation, where they have a different political view to larger and more powerful participants in the political system. It would also expose people to practices such as harassment or 'cancel culture' campaigns aimed at harming their careers or public reputation. It is not clear how this $2 500 value was arrived at, for instance how such an amount could 'corrupt' the political system. This low threshold rubs against the democratic freedom to be able to freely sponsor participants in public debate, to support a donor's values or vision. A disclosure threshold that is set too low will mean a loss of privacy. Privacy rights should not be lightly traded.
2.90
The bill requires reporting of donations within seven days by donors and recipients. This obligation takes no account of whether a reporting entity has regular or professional accounting staff, who have the time to comply with this obligation. It does not recognise that some political entities rely heavily or entirely on volunteer effort and decentralised activity to raise and spend money. It would be unreasonable to expect all donors to report with the same intensity as political parties, when a donor has only a peripheral hobby interest in politics. It is not even possible for all political parties to comply with such an onerous workload. Indeed in some states where faster reporting has been imposed, it has been a practice to provide public funding to foot the bill for this red tape burden.
2.91
The amendments would also require that all donations be paid to the AEC in the first instance, before being passed to a recipient. This data would then feed into a disclosure portal. This is an extreme intrusion into altruistic gifting of money to political causes. It effectively nationalises part of the function of political parties and puts the AEC into an impossible position as independent administrator of the electoral system.
2.92
There is no guarantee that the AEC could release of funds at the pace that is needed during an election campaign, particularly given the bill proposes that parties have to apply for each release of funds and the AEC has to assess each such application. This would hamstring parties when they need to rebut their opponents in fast-moving public debate. It would expose the AEC to claims of bias and interference when they fail to release funds as swiftly as parties require.
Implementation issues
2.93
The evidence to the committee made clear that there are significant and indeed fatal issues of impracticality with the bill, in regard to both its core design and implementation. Several aspects would cut against the workings of the democratic system.
2.94
For example, the committee notes the observations from
Professor Anne Twomey and other academics that there are several technical problems in the drafting of the bill, meaning the bill would not properly achieve its stated purpose.
2.95
In addition, evidence before the committee indicates that the proposed reforms may result in substantial increases to the administrative requirements and compliance activities of the AEC. These are likely to come with corresponding increases in terms of cost and complexity.
2.96
The Government recently had to provide $96.7 million to the AEC to commence merely the first phase of replacing its ageing IT systems, merely to be able to keep performing its basic responsibilities as reflected in the existing Act. The proposals in the bill are uncosted but far reaching in their potential impact on taxpayers.
2.97
The committee is therefore concerned that a complex new IT system is not achievable without taking account of fundamental challenges with existing AEC systems that have been made well known over the past two years as the Government has started market soundings and investment in a long-term total re-build. Core AEC ICT systems are approaching the end of their serviceable life and the AEC's IT experts are currently heavily occupied on the project to replace those systems. The proposal does not reflect any understanding of the capacity for this finite number of experts to support simultaneous major IT system changes.
2.98
Recent AEC testimony to this committee at Senate Estimates revealed that
$48 million needed to be spent on foundational IT systems, before functional systems could be added on top:
What we're also doing is spending some money on foundational infrastructure—I won't try and use tech talk—essentially to streamline, automate and integrate our processes and technology. That will cost about $48 million. … That includes an enterprise service management model to improve the efficiency of our operations; business process management, so we can map our processes and make sure that they're as efficient as possible; and enterprise integration, which makes sure that the systems talk to each other. The plan is to invest in that foundational piece—that's tranche 1. Then we would look at the election management and roll management systems down the track. But our view and experience tells us that we invest in the foundational piece before we take on the big legacy system.
2.99
The committee is also concerned about the lead time for the AEC to establish such a system, but the bill proposes commencement within 12 months. Such a system would need development and system testing to a high level of confidence before deployment because of its impact on the ability of parties to campaign in an election.
2.100
As submitters to the inquiry have noted, the AEC is unlikely to have the capacity to meet these additional costs out of its existing human and financial resources. Diversion of current AEC funding could not provide a magic pudding solution, without impairing essential parts of the AEC's operations.
2.101
Of greatest concern, the committee is cognisant that the evidence indicates that some of the proposed reforms may place significant burdens on smaller community organisations and minor parties, without delivering equivalent levels of public interest benefit. This is of considerable concern to the committee, as it could interfere with people's ability to engage in the democratic process. It indicates to the committee that more thorough consideration of any electoral donation reform is required before the introduction of heavy-handed legislative amendments in this area.
2.102
A key reason for disclosure thresholds is to ensure that only significant donors lose the privacy of their political beliefs and are exposed to the risk of unsavoury political harassment.
2.103
The electoral funding and disclosure regime is of enormous significance for Australia's democratic processes and institutions. In the committee's view, changes to this regime should only be made following a comprehensive policy process, with the input of key stakeholders, to ensure that the regime upholds the principles of transparency, clarity, timeliness and enforceability.
2.104
It is not apparent to the committee that such a rigorous policy process has been undertaken in the case of this bill. In addition, evidence before the committee suggests that additional work is required to obtain broader consensus on the most effective means of reforming the funding and disclosure regime, as well as to identify and secure any additional resources required by electoral bodies.
2.105
In light of these concerns, the committee recommends that the Senate does not pass the bill.
2.106
The committee recommends that the Commonwealth Electoral Amendment (Donation Reform and Other Measures) Bill 2020 not be passed.
Senator James Paterson
Chair