How does Australia’s political donation system work?

Election campaigns are expensive exercises. Advertising, including social media, letterbox, even corflutes (candidate posters named after the plastic material they are printed on) all cost a lot of money. Candidates travel through their electorates for several weeks while key party leaders criss-cross the country during a campaign.

This means that, well before election time, political parties and candidates are encouraged to raise as much money as possible from private sources, including deep-pocketed lobby groups and wealthy benefactors, as well as unions and grassroots supporters.

A federal donation disclosure system, administered by the Australian Electoral Commission, exists so voters can see who is funding the campaigns of political parties and independent MPs and senators. But major shortcomings have led to repeated calls from experts for campaign finance reform to improve transparency and reduce the influence of private interests.

So how do donations to political parties work?

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Major parties are multi-million dollar machines.

The Liberal and National parties attracted nearly $83 million in funding in the 2020-21 fiscal year, according to their statements to the commission. Labor raised more than $67 million while the Greens declared almost $16 million.

However, only a fraction of this money is reported as a donation. Other sources of funding may be reported as “other revenue”, which may include loans received, proceeds from the sale of assets, returns on investments, government funding, discretionary benefits and membership dues.

In total, political parties collectively reported about $177 million in funding in the past fiscal year — but only $15 million was reported as donations.

The source of the millions of dollars in political funding is unknown.

Donations and “other receipts” only have to be reported to the Elections Commission if an amount exceeds the “disclosure threshold,” currently set at $14,500, though it increases every year. This is a much higher threshold than the one that exists at the state level. For example, Queensland and New South Wales require donations over $1,000 to be disclosed, and in Victoria the threshold is $1,050.

The Center for Public Integrity, an independent think tank that analyzes AEC disclosure data, estimated that in fiscal year 2020-21, about $68 million – about a third of the $177 million that flowed into the coffers of political parties – were “hidden” money. Much of it is thought to be made up of donations received below the disclosure threshold. “We don’t know who is giving this money. We only know that it is below the disclosure threshold,” says Professor Joo-Cheong Tham, director of the center.

A quarter of political donations come from “big money”.

Any Australian person or company can donate to a political candidate or party. There are no bans on donations from certain industries — like gambling, tobacco, real estate developers — at the federal level as there are in some states. But foreign donations over $100 are prohibited.

In reality, the so-called “big money” dominates the funding of political parties.

Nearly a quarter of all donations came from just 10 donors in the 2020-21 fiscal year, according to analysis by the Center for Public Integrity. The biggest donor was billionaire Anthony Pratt through his company Pratt Holdings, which donated $1.288 million to the Liberals and $10,000 to Labour.

Former fund manager Simon Fenwick and his wife, Elizabeth, donated $650,000 and $350,000 respectively through their investment vehicles to conservative campaigner Advance Australia, seen as a left-wing outfit rival GetUp!

Powerful lobby groups and big accounting firms have also given big. The Pharmacy Guild ($206,500 to the Coalition, $88,500 to Labour), property developer Harry Triguboff’s Meriton Apartments ($285,000 to the Liberals) and Melbourne man William Nitschke who gave $300,000 to the Great Australian Party of former senator Rod Culleton.

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There is no limit to donations. Clive Palmer massively exceeds the major parties.

Clive Palmer donated more than $83 million to his United Australia Party through his mining company Mineralogy ahead of the 2019 election, despite failing to elect a single candidate.

This time, Palmer is on track for a similarly sized spending spree, having spent more than $31 million on advertising by the end of February — more than 100 times more than the major parties. He pledged to spend an additional $40 million during the six-week election campaign.

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The lack of a cap on donations poses a major equality issue for the campaign trail, says Graeme Orr, a professor at the University of Queensland who is an expert in campaign finance law. Every state, with the exception of WA and Tasmania, has decided to address this issue by implementing donation caps or spending limits for their state and local elections.

“The great thing about the Commonwealth system is that it’s every man for himself. Political equality would say we need to have caps on donations and spending to control the arms race,” says Orr.

We won’t be able to assess the influence of big money on this election until next year.

The donations that political parties and candidates are currently receiving — or have received since July of last year — to fund their campaigns will not be revealed until the commission releases its annual disclosure data in february.

This lag of up to 19 months has fueled calls for “real-time” donation reform.

Labor, if it wins government, will pursue reforms to lower the disclosure threshold from the current $14,500 to a fixed $1,000, as well as requiring real-time disclosure of political donations.

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The Coalition made some changes to the electoral law while in government, including banning foreign donations and requiring entities to register as “significant third parties” and open their books to the commission if they spend more than $250,000 in campaign expenses a year – a move targeted at independent and climate advocacy groups such as Voices For campaigns.

It is Australian Greens policy that there should be a ban on all political donations from the mining, development, tobacco, alcohol, gambling, banking, defense and pharmaceutical industries . They also want donations capped at $1,000 a year, real-time disclosures, and limits on political party campaign spending.

A number of MPs and independent candidates are campaigning on a platform of political donation reform in this election. Tasmanian Independent MP Andrew Wilkie, for example, has proposed a private member’s bill requiring real-time disclosure, a $1,000 donation disclosure threshold, a $50,000 donation cap during a cycle campaign and banning donations from fossil fuel entities, gambling companies, liquor companies, and the tobacco industry.