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Taxation Laws Amendment (Political Donations) Bill 1998
Bills Digest No.237 1997-98
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any officia l legal status. Other sources should be consulted to determine the subsequent official status of the Bill.
Taxation Laws Amendment (Political Donations) Bill 1998
â¢ widen the range of contributions and gifts eligible for a tax de duction to include gifts and contributions made to:
- independent members and candidates of Commonwealth, State, Northern Territory or ACT Parliaments and Assemblies and elections and
- political parties registered under State or Territory legislation and
â¢ to increase the maximum deduction to $1 500 per year.
Division 30 of the Income Tax Assessment Act 1997 (the 1997 Act) provides that contributions to political parties registered under the Commonwealth Electoral Act 1918 that consist of money or property purchased within a year of the making of the contribution and exceed $2, are deductible to the donor up to a maximum of $100 per year. The deduction is not available to companies. As the deduction is only available to registered political parties under the Commonwealth Electoral Act 1918 it does not apply to independent candidates in a Commonwealth election who have not registered as a political party (it is common for ‘independent’ candidates to register as a political party even if they are the only candidate for that party in order to take advantage of benefits available to registered parties, such as this tax deduction for contributors). The deduction is also not available to political parties registered only under State or Territory law.
In the Joint Standing Committee on Electoral Matters report on the 1996 Federal Election, it was noted that the Liberal Party had submitted that the annual maximum deduction be increased to $10 000 and that the ALP submitted that the level should be $1 500. The Committee noted:
An increase in the maximum deduction would encourage small to medium donations, thereby increasing the number of Australians involved in the democratic process and decreasing the parties’ reliance on a smaller number of large donations.(1)
While the decrease in reliance on a smaller number of large donations appears uncontroversial, arguments can be made that the increase in the amount that can be deducted will have little if any effect on the number of Australian individuals involved in the democratic process. For example, it is difficult to see that there is a significant number of people, if any, who decide not to make any donation to a political party because only $100 is deductible per year rather than a larger amount. This would amount to a person deciding that if they cannot get a deduction for the higher amount they will not donate the $100 subject to the deduction. However, the Committee recommended that the deduction also be available to companies and this may explain the suggestion that the number of Australians involved in the democratic process will increase so long as it is remembered that a company is legally a person (although it may be further argued that an owner of a company can claim a deduction from making the donation as an individual rather than through a company structure. The extension of the deduction to companies may therefore allow an individual to claim a deduction for donations made on an individual basis and through a company/companies, thus leading in effect to double or multiple tax deductions being available. Person is defined in the 1997 Act to include a company).
Recommendation 78 of the report states:
that section 78 of the Commonwealth Income Tax Assessment Act [this is a reference to the Income Tax Assessment Act 1936 rather than the 1997 Act] be amended so that donations to a political party of up to $1500 annually, whether from an individual or a corporation, are tax deductible.(2)
In relation to donations to independent Members of Parliament the report noted that it had received submissions from a number of independent members to the effect that donations to such people are not deductible. The report concluded that: ‘This inequity should be rectified.’(3) The Committee recommended:
that section 78 of the Income Tax Assessment Act be amended to provide that donations to an independent candidate at a Federal or State election are tax deductible, at the same level as donations to registered parties.(4)
The current disclosure rules will continue to apply in respect of donations.
Part 1 of Schedule 1 of the Bill will insert a new Subdivision 30-D into the 1997 Act. A deduction will be allowed for contributions made to:
â¢ a political party registered under the Commonwealth Electoral Act 1918 or corresponding State or Territory legislation
â¢ an independent candidate (see below) for a Commonwealth, State, Northern Territory or ACT election or
â¢ a person who was or is an independent member (see below) of the relevant Commonwealth, State, Northern Territory or ACT Parliament or Assembly.
To be eligible the gift must be of money or property acquired by the taxpayer during the year before the making of the gift and must be valued at $2 or more. Testamentary gifts do not qualify for the deduction. To qualify for the deduction, a gift to an independent member must be made while the person is an independent member or, if the person ceases to be a member because of an election, during the period between when the person ceases to be a member and when candidates for the election are declared ( proposed section 30-242 ).
A person will be an independent candidate if they are a candidate for a Commonwealth, State, Northern Territory or ACT election and are not endorsed by a registered political party. The person ceases to be an independent candidate when the election is declared or, if the election fails and the result is not declared, when the result for the replacement election is declared. ( proposed section 30-244 ).
A person will be an independent member if they are a member of a Commonwealth, State, Northern Territory or ACT Parliament or Assembly and are not a member of a registered political party. They will become an independent member on the declaration of the election ( proposed section 30-245 ).
The maximum deduction in a year will be $1 500 ( proposed section 30-243 ).
Item 3 of the Table contained in section 30-15 of the 1997 Act, which currently deals with deductions for contributions to political parties, will be repealed by item 11 of Schedule 1 .
Application: To contributions or gifts made on or after 1 July 1998 ( item 18 ).
1. Joint Standing Committee on Electoral Matters, The 1996 Federal Election, 103.
2. Ibid., 104.
30 June 1998
Bills Digest Service
Information and Research Services
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