Show us the money

It's time to fix Australia’s broken campaign financing system

By Andrew Gibbons. PhD Candidate, University of Melbourne

This week's ABC Four Corners program was yet another reminder of Australia's broken system for funding election campaigns.

The latest reports suggest the NSW division of the Liberal Party failed to comply with the state's electoral disclosure laws.  Until this is fixed, the Commission is denying the party's NSW division access to $4.4 million in public campaign funding.

These most recent allegations again raise questions about the way election campaigns are financed in Australia, particularly the lack of transparency around private donations.

How election campaigns are financed

Election campaigns are expensive. The 2013 federal election cost taxpayers $197 million, and the 2016 election campaign is predicted to cost approximately around $227 million.

Australian elections are funded through public funding (as shown above). However, political parties can also fund their election campaigns from private and industry donations.

Public funding is set out in the Commonwealth Electoral Act 1918. Any candidate or party that receives 4% of the vote share is entitled to public funding, which is linked to CPI, and will be worth $2.63 for every formal first preference vote. This is paid after polling day.

Parliamentary entitlements for ministers and shadow ministers, such as travel expenses for politicians and staff, are also provided up until the official start of the campaign period, generally marked by the official campaign launch.

This helps explain why political parties leave their campaign launches until later in the electoral cycle in order to make the most of taxpayer funding.

The Australian Electoral Commission (AEC) is responsible for the administration of public funding and monitoring of private donations to political parties/candidates at the federal level.

Under the current federal disclosure rules, political parties must give information about donations over $13,000 to the AEC.

The AEC states:

“candidates, registered political parties, their State Branches, local branches/sub-party units and their associated entities, donors and other participants in the electoral process [are required] to lodge annual or election period financial disclosure returns with the AEC.”

The AEC makes this information publicly available on February 1 every year after an election period.

Under the existing Commonwealth disclosure laws, amounts totalling less than $13,000 within a financial year can effectively be disregarded when disclosing donations.

The disclosures requirements also vary from state to state, adding further complexity to this issue and creating further possibilities for disclosure avoidance by individuals. While the Commonwealth has a high disclosure threshold of $13,000, the disclosure threshold for political donations in NSW is set significantly lower at $1000.  On the other hand, Victoria's system does not regulate the disclosure of political donations in state elections. In Victoria, Commonwealth disclosure requirements only apply to parties that are registered federally.

Australia has some of the most relaxed laws around campaign finance disclosure compared to other democracies.

The United Kingdom has a disclosure threshold for donations over £7,500 to a party, and donations that are (or add up to) over £1,500 from a source that has already been reported by the party in the same calendar year. In addition, there are also capped spending limits at elections, such as the national UK elections.  Other countries have stricter regulations than Australia. Canada bans donations to political parties from corporations and foreign entities.

The latest allegations this week also raise questions around who can donate to political parties and candidates in Australia.

Unlike other electoral systems, third parties including corporations, foreigners, and trade unions are permitted to donate to Australian political parties and candidates.

There are also no Commonwealth restrictions on how much an individual or organisation can donate to a political party or candidate (although some states such as NSW have donation caps).

What changes are the political parties proposing?

While the Liberal Party have yet to release an official policy about political donations, Prime Minister Malcolm Turnbull has hinted that it should be examined in the next parliament.

The Labor Party and Greens are calling for change. Both parties have released policies to improve the transparency of Australia's election campaign finance system.

Under Labor’s proposal, information about campaign donations over $1000 would need to be disclosed and updated to the public register in “real time”. The ALP has also suggested banning anonymous donations over $50, and preventing donation splitting.  This would prevent individuals or organisations from splitting large donations into small amounts or among a group of people and then donating them to a political party.

The Greens have also called for a cap on individual donations and other changes. These include prompt reporting of donations on a public website, limits on electoral spending, and a ban on corporate donations.

An effective political system relies in part upon accountability of its actors and institutions. When it comes to political donations and campaign finance, Australia is falling behind other western liberal democracies.

While there are disadvantage and benefits of the party policies outlined above, they will nevertheless improve transparency and integrity in the Australian political system. Lowering the disclosure thresholds is a start, but further reform is needed to improve regulation across state and territory boundaries.

The proposals above suggest substantial reform may occur in the near future, but only time will tell if these promises result in any significant legislative action. Previous attempts at reform, such as the Commonwealth Electoral Amendment (Political Donations and Other Measures) Bill 2009, were stymied by Parliament and crippled by inaction.

Future change to campaign donations must also consider public funding, given the substantial loopholes that appear to provide advantages to incumbents. This means that sitting politicians often receive cost of travel and other taxpayer funds, such as money to cover expenses, up until their election campaigns are officially launched. This gives them an unfair advantage over non-sitting candidates who do not have access to public funding until after the election.

Any attempt to reform Australia's election finance system will face challenges. Even so, given the consistent allegations of misconduct that frequently makes headlines, it's time we fixed a system that is clearly broken.

Banner image: Flickr/Sam Ilić

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