What's dodgy about the Australian political donations reforms?; the Electoral Legislation Amendment (Electoral Reform) Bill 2024
On November 15 2024 the the Albanese Government announced it will introduce legislation on Monday November 18 , the Electoral Legislation Amendment (Electoral Reform) Bill 2024, to reduce the donation disclosure threshold from the current $16,900 to $1,000. The Bill raises the expenditure threshold for a ‘third party’ to $20,000 over a year.
Under the Bill electoral expenditure by registered political parties (Liberal and Labor) and their ‘expenditure group’ will be aggregated, meaning political parties will share a cap with state branches (including related state branches), their endorsed candidates, elected parliamentarians and nominated entities.
Together, they will have, a tax-payer funded:
- ‘Federal cap’ of $90 million
- ‘Divisional cap’ of $800,000, and
- ‘Senate cap’ for a State or Territory based on the number of Division in the relevant State or Territory.
The government says it will take “big money” out of election campaigns – or, more realistically, curb it – with its legislation imposing donation and spending caps and real-time disclosure.
But crossbenchers and other critics are up in arms, about the effect on small players and the fact the package is being rushed through parliament in a fortnight.
Many of these have called for the Bill to be not proceed further until referred to the Joint Standing Committee on Electoral Matters, to inquire into the intended and unintended consequences.
If the Bill is not to commence until 2028; what is the rush?
They have stated the Bill creates an unfair playing field, giving advantage to incumbents over new candidates by failing to give all candidates the same public funding for administrative support and failing to account for incumbent resources such as an office, staff, a vehicle and marketing budget whilst imposing a spending cap on candidates.
They have pointed out the Bill provides disproportionate yearly administrative assistance funding to major political parties, and fails to account for any economies of scale; and entrenches political party advantage over independent candidates by imposing a spending cap on individual seats while still permitting additional party advertising under a party's $90m national cap.
Academics have stated the bill will reduce the influence of big money in politics, but does not go far enough in curbing large donations and excessive spending. Its scorecard on promoting fair elections is mixed: it will make elections fairer in key respects, but also unduly favour the major parties, political parties with wealthy candidates, and those with investment income.
Gift caps are the principal way in which the bill seeks to prevent large donations. The million-dollar donations made by Pratt, Keldoulis and mining companies would be illegal under these caps, which limit donations to each political party to $20,000 a year.
However, these caps also have major loopholes. Exclusions from the caps allow for disguised donations, for example, membership and affiliation fees to associated entities are not caught by the caps. While there is a principled basis for exempting membership and affiliation fees to political parties (including trade union affiliation fees), the bill allows for inflation of these fees by leaving the exemptions uncapped (unlike NSW laws).
Significantly, the caps do not apply to donations made by candidates to the party that endorsed them. They would not, for example, prevent Clive Palmer from continuing to donate millions to the United Australia Party or prohibit donations such as the $1.75 million Malcolm Turnbull gave to the Liberal Party in 2016–17.
The bill’s federal cap of $90 million will reduce levels of spending (the Coalition, United Australia and Labor each spent more than $100 million in the last election) and prevent further increases.
However, the cap is set too high. Analysis by the Centre for Public Integrity showed the federal cap is disproportionately high compared to the state caps. For example, it will allow more than double a maximum spend per elector compared to the New South Wales cap on spending.
The $11.25 million cap on third-party spending shares the same weakness. While this high level was presumably adopted to lessen the prospect of a successful constitutional challenge to the cap (as occurred with the NSW cap), the scale has been tilted too far.
As it stands in the Bill, the third-party cap will not prevent campaigns such as the $22 million advertising campaign by mining companies against the Rudd government’s resource super-profits tax, and which contributed to the ousting of Kevin Rudd as prime minister.
The loophole with candidate donations will favour parties with wealthy candidates. Parties will also be able to register their investment vehicles as “nominated entities” and receive income outside of the gift caps, a further boon for the major parties.
Major parties further benefit from the narrow scope of Division and Senate caps which leave out considerable party spending directed at these contests.
The bill also seeks to increase public funding based on first preference votes (election funding) and the number of seats (administrative assistance funding). The major parties will receive substantial increases in public funding due to their share of votes and seats as a result.
Independent Zoe Daniel said the major parties “want Australian politics to remain a table for two, with ordinary Australians who are sick of politics as usual not invited.
"While an independent MP might have a cap of around $800,000 to spend on an election campaign, the major parties would have a war chest of around $90 million, providing scope to advertise their big brands across tight races where it suits them,” she said.
Mackellar MP Dr. Sophie Scamps said on November 15:
''Today we learned that Labor and the Coalition have joined forces to do a back room deal on our democracy. A deal that has the potential not to strengthen our democracy, but to weaken it as it will make it harder for new entrants and independents to be elected. A deal that has been struck between the major parties, without proper consultation and without proper process.
The crossbench and I have been calling non-stop this term for reform of political finance laws to build in far greater transparency and ensure that our democracy can’t be bought or unduly influenced by wealthy individuals or corporations. To that end I fully support the Private Members Bill of Curtin Independent MP Kate Chaney – which implements transparency measures and caps donations to 2% of public funding.
In contrast, the Government’s proposed caps on donations and spending are structured in a way that will make it harder for new entrants, independents and minor parties to be competitive and to be elected. Why? Because the major parties are worried. Over the last couple of decades, the vote for major parties has been trending steadily downwards with over one third of votes last election going to candidates outside the major parties. This frightens the current duopoly and is viewed as a threat to their stranglehold on power.
A democracy should be a contest of ideas, and greater diversity in parliament means more robust debate, fresh perspectives and more eyes holding the government to account.
This is our democracy. Any change to it should be open and transparently prosecuted.
Instead, the Government and Opposition have come to an agreement in secret and are pushing to rush the legislation through in 2 weeks without adequate consultation. At a minimum, a Bill with implications this far-reaching should have been released in exposure draft form, with a period for public consultation, and then put through proper parliamentary scrutiny with a Senate inquiry.
Australians should be very suspicious indeed, when Labor and the Coalition – who have been incapable of agreeing on virtually anything in this term of Parliament – have miraculously managed to agree on reforms to avert their own decline.''
Warringah MP Zali Steggall stated:
''At a time when the cost-of-living pressures continue to rise, our two major parties have struck a deal to entrench their duopoly through providing themselves increased funding in our elections and diminishing the opportunity to be challenged.
The minister has described this legislation as the biggest reform to electoral law and processes in 40 years and yet proposes to ram it through within barely a couple of days of the legislation being public, because you wouldn't want too many people to actually have an opportunity to analyse it before you embed your advantage and pass bad law.
For the benefit of the public, I want everyone to understand just how much money the government and the coalition are proposing to pay themselves. Once this bill takes effect, under the numbers currently in the parliament, Labor are proposing that for their compliance costs they should be paid $2.7 million per year from public funds. The Liberal Party is proposing they should be paid $1.5 million per year for compliance costs. The Nationals are proposing $540,000 per year.
The bill introduces three types of caps that will create a very unfair and uneven playing field. First, the bill imposes a cap of $800,000 spending on individual candidates in the electorate. I agree that it sounds like a lot of money, but the spending cap only relates to the campaign spend and does not account for the incumbent access to government offices, staff, vehicle, marketing budgets that are already paid for. So, whilst a new challenger and candidate will be expected to pay for all that, for them it has to come out of their $800,000 budget. For an incumbent, that's okay—you can get that extra. The proposed amendments favour an incumbent not just through those advantages of votes and time spent and presence in the electorate but through that expenditure budget as well. Under these rules, an independent candidate will be outspent before they even reach the starting line.
Secondly, while the spending cap for individuals only applies to a specific seat, political parties get a national cap of $90 million to spend. This means that they will allocate their resources and advertising under that national party cap. It's clear that they are not going to allocate the full $800,000 to 151 seats in an election. They will pick and choose which seats they think are winnable, which ones might be safe and which ones might be marginal. Then they will blanket those electorates with additional advertising under that national cap. We can see a challenger will be limited to $800,000, but a political party candidate will have that $800,000 cap plus any additional amount that can be used from that $90 million cap. So it is clear that there will not be an even spend when it comes to political campaigns and it will disproportionately impact marginal seats, especially if they are trying to fend off a challenger.
We know the major parties already run national television brand campaigns that have mass reach to voters across all electorates. They run centralised campaign offices, databases and infrastructure. But an Independent taking on a major party candidate must set up from scratch. There is just no accounting for that. On top of that, a major party candidate will be able to channel up to $800,000 into seats which they want to win or which are under threat, bombarding them with social media, billboards and leaflets, and they're all designed by head office to stamp out the voice of a challenger....
As I said, before even getting to the starting line a challenger is already being penalised and disadvantaged by the system. On this, I should note that the government has resisted again that there be more scrutiny on this, and it's resisted in all briefings any notion that there be an administrative assistance funding to new challengers or that such administrative assistance funding should be capped in relation to what the major parties are going to receive.
They are proposing just a linear extrapolation of the numbers of members of the current parliament. For any number of MPs in a political party, that just keeps adding lots of $30,000 to that political party.
Every year, what you're going to see—even non-election years—is that the public purse will pay political parties at a time when their support is waning.
The Australian people are saying: 'We don't trust you. We don't like you as our choice. We want more competition and diversity.' The political parties, rather than evolve to actually reflect and represent the issues and concerns of the community, are turning to: 'How can I rig the game to help myself from the public purse?' It is outrageous.''
Independent Member for Clark, Andrew Wilkie, moved an amendment that proposed:
''omit "Electoral Reform", substitute "Funnelling Public Money to the Major Parties Under the Guise of Transparency".
Stating:
''In essence, all the amendment seeks to do—it's very brief—is modify the title of the bill, from simply referring to 'electoral reform' to refer to 'funnelling public money to the major parties under the guise of transparency'. This isn't meant to be funny at all. It's a deadly serious amendment and, I think, an appropriate bookend to the case the crossbench has made against these reforms over a number of days now. I have become disillusioned with the practice in this place of naming bills in misleading ways. This is an opportunity to name this bill correctly, because this bill does exactly that. This bill seeks to funnel public money to the major parties under the guise of transparency.''
The Electoral Legislation Amendment (Electoral Reform) Bill 2024, was agreed to on November 20 2024 in the House of Representatives. The Bill was tabled in the Senate the same day, where Labor and the Coalition outnumber all others.
In the Senate the entire crossbench were voting for parliamentary scrutiny of the 400 pages of electoral reform. Here again the Liberals, Nationals and Labor voted against parliamentary scrutiny of the Bill.
Independent David Pocock stated:
''[It is] Disingenuous of Senator Jane Hume to suggest a joint parliamentary committee has already looked at electoral reform. No one’s examined the 400 pages of legislation introduced yesterday (November 18).''
The Australia Institute stated the [then] proposed Bill would deliver tens of millions of dollars in additional taxpayer funding to the major parties ahead of the 2028 federal election, giving them a huge financial advantage over minor parties and independents seeking a seat in the nation’s parliament.
“The integrity of Australian elections is too important for the Albanese government’s proposed changes to be rushed through without scrutiny, including a thorough parliamentary inquiry,” said Bill Browne, Director of the Australia Institute’s Democracy & Accountability Program.
“Politicians voting together to give political parties more money will reduce trust in government unless the public is included in the process. The changes are not due to start until the election after next, around 2028, so why the unseemly haste to pass them in the last sitting weeks of the year?''
Major party stitch up leaves electoral reform bills unchecked
Responding to the Government and Opposition blocking the Greens move to refer the electoral reform bills to a Senate inquiry Greens Senate leader and democracy spokesperson Senator Larissa Waters said:
“Today in the Senate the government and the opposition teamed up against the entire crossbench to block an inquiry into the electoral reform bills. This is bad for democracy.
“There are some straightforward transparency measures in this bill, like lowering the disclosure threshold to $1,000 and real-time disclosure, which we have long called for.
“The Greens are ready to pass transparency measures.
“However, we want an inquiry to ensure that the proposed funding reforms to get big money out of politics don’t entrench the two party system and make it harder for diversity and new entrants.
“It is the job of the Senate to scrutinise proposed legislation and that is what we have called for today.
“Any reform which limits donations to anyone who challenges Liberal and Labor, while protecting the establishment parties' sources of income, will be seen for what it is - a complete stitch up, undermining our democracy, and the public’s expectation of fair play.
“Both the big parties continue to accept huge sums of money from dirty industries like coal and gas with a track record of trying to buy favourable policy outcomes.
“The Greens have been calling for reform for decades.
“The Greens are ready, with a bill, that provides real electoral reform, but we’re very suspicious that the two big parties will gang up to rig the system to benefit themselves and lock out smaller parties and new entrants.”
Anne Twomey, a Professor Emerita of the University of Sydney, who has previously worked for the High Court, the Parliamentary Research Service, the Senate Legal and Constitutional Committee and the Cabinet Office of NSW, has published two videos that "gives an overview of the Australian Commonwealth Government's campaign finance reforms in the Electoral Legislation Amendment (Electoral Reform) Bill 2024 (Cth)" and identifies one constitutional issue.
Below that is a follow up video.
The first, 'What's dodgy about the proposed Australian political donations reforms?', gives an overview of the Australian Commonwealth Government's campaign finance reforms in the Electoral Legislation Amendment (Electoral Reform) Bill 2024 (Cth). Prof. Twomey states these reforms include better donation disclosure provisions, caps on political donations, caps on electoral expenditure and public funding to political parties.
The video then addresses particular issues concerning the capping of political donations, noting that the caps are so high that they could not possibly be for the proclaimed purpose of preventing the risk or perception of undue influence or corruption arising from the making of donations. This opens up the way for a potential constitutional challenge if there is no 'legitimate purpose' for the cap provisions, or if they are not 'reasonably appropriate and adapted' to advance a legitimate purpose.
The second video, 'Campaign expenditure - What other problems are there?', focuses upon electoral expenditure. It looks at what funds are permitted to be used for electoral expenditure and the different caps that are applied to electoral expenditure. It compares the position of the major parties with that of Independents and new parties, as this may be relevant in any constitutional challenge to the law, when passed.
Prof. Twomey states of the second video; 'Note - I did this late at night. Given the time constraints, it's possible that not everything is 100% accurate, but I did my best, and it should give you a reasonable understanding of what the Bill does.'
The bill can be found here for those who wish to examine it themselves: https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r7280