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RESEARCH PAPER SERIES, 2019-20 19 MARCH 2020

Undisclosed funding sources in Australian federal politics: a quick guide Dr Damon Muller Politics and Public Administration

Political donations for Australian federal elections are regulated by Part XX of the Commonwealth Electoral Act 1918 (the Act). Donors, political parties, associated entities and political campaigners are required to submit an annual return for each financial year to the Australian Electoral Commission (AEC) detailing any donations they make or receive above the disclosure threshold. The disclosure threshold is indexed annually and is $14,000 for the 2019-20 financial year.

Annual returns covering each financial year are published by the AEC on its Transparency Register on the first business day of February in the following year. States and territories generally have their own political finance regimes for state and territory elections, which are discussed in detail in the Parliamentary Library publication Election funding and disclosure in Australian states and territories: a quick guide.

Under Part XX of the Act disclosure of any money received consisting of amounts that are at or below the threshold is not required. While some political parties voluntarily disclose some donations (‘gifts’ in the Act) that are below the disclosure threshold (see below), this means that a proportion of the income that Australian political parties use to fund their election campaigns and operate comes from unknown sources. Funds which can be used in election campaigns that come from undisclosed sources have been referred to as ‘dark money’.

Undisclosed money is simply the difference between what a party records as its total income in a financial year, and the sum of its reported money received—donations and other receipts. This information is readily available on the AEC Transparency Register.1

Both party returns and donor returns provide information about money in politics. However these two sources are often difficult to reconcile, with some donations only listed on one of the two sources, or aggregated in different ways.

It is important to note that donations do not constitute the entirety of political parties’ incomes. Political party returns also list non-donation income received above the disclosure threshold as ‘other receipts’, and can also receive public funding in respect of elections. The ‘other receipts’ include membership fees and income such as proceeds from asset sales or returns on investments. In addition, as well as setting out income, political party annual returns also list total annual expenses and debts.

1. This calculation is complicated by parties including transfers of money between different branches of the party on their annual returns in a way that is not straightforward to account for. This means that when the ‘other receipts’ of the different party branches within a group are added together, the amount is likely double-counting some of these transfers. So the differences between total receipts and declared receipts for party groups likely underestimates the total amount of undisclosed money.

Undisclosed funding sources in Australian federal politics: a quick guide 2

The extent to which political party finances should be entirely open to the public is a matter of debate (parties may have commercial-in-confidence arrangements with suppliers, for example), however there is a public interest argument for knowing who donates to political parties.

What are party funds used for? Like most sizeable organisations, political parties have a range of expenses such as operating costs (salaries, rent, office expenses and so forth). A regular (and major) expense for political parties is the funding of election campaigns. Under Commonwealth electoral law political parties are not required to disclose their campaign spending, and because returns cover a financial year and so are often not aligned with election periods, it is not possible to determine party campaign spending from reported total expenditure. As a result we do not know how much Australian federal election campaigns cost. In contrast, most states and territories do require parties to reveal how much they spend on state and territory elections, and in New South Wales, South Australia and the Australian Capital Territory the amount they can spend is capped.

Parties that wish to receive public election funding (calculated at a specific rate per vote received in respect of candidates who receive more than four per cent of the vote) are required to submit a claim detailing election spending—however the details of the claims are not public, only the final

amount that the AEC pays (parties can also receive public funding from state electoral authorities). For the 2019 federal election parties and candidates were paid a total of around $70 million in public funding, of which around $27 million went to the Liberal Party (around 40 per cent) and $24 million went to the ALP (around 35 per cent). There is no public information on how parties spend

this money.

How much money is from undisclosed sources? The amount of money from undisclosed sources in political party annual returns differs from year to year, although it is generally higher in an election year (the red highlighted years in Figure 1). In 2018-19, the most recent year for which data are available and the year which included the 2019 federal election, just under $115 million was undisclosed by political parties—over one-quarter of total income ($434.8 million). The total amount between 2006-07 (when the disclosure threshold was increased to $10,000) and 2018-19 is just over $909 million; the annual average is about $70 million (data on the amounts is in Appendix A).2

The amount varies by political party. For 2018-19, for example (see Table 1 below), the Liberal Party reported the largest amount at $59.2 million of its total $165.2 million income (almost 36 per cent of total income). While Labor and the Greens have stated that they report donations of, respectively, over $1,000 and $1,500 or more, the two parties still account for around $38 million between them—$27.6 million for Labor (almost 22 per cent of total income) and $10 million for the Greens (49 per cent of total income). Seventy-nine per cent of the total income of the One Nation Party is unreported, the largest proportion of undisclosed money relative to total income of all of the significant parties, suggesting that the party possibly has a large number of small donors.

2. The analysis in this paper is taken from data extracted from the AEC Transparency Index on 4 February 2020. Any amendments to submitted returns may lead to variation in the figures after that date.

Undisclosed funding sources in Australian federal politics: a quick guide 3

Figure 1: Total reported receipts by type (federal)

Note: For the purposes of this chart any money received from the AEC (or a state or territory electoral commission where the party has listed that as a receipt in their returns) has been classified as ‘public funding’. Receipts are classified as ‘subscription’ in a small number of returns, however this does not reflect standard present practice. Selected data for the table is in Appendix A.

Source: Parliamentary Library analysis of AEC data.

Table 1: Reported and unreported income by party in 2018-19 Party Total income ($) Disclosed ($) Undisclosed ($) Undisclosed (%)

Liberal Party 165 274 107 106 006 985 59 267 122 35.86

Australian Labor Party 126 279 024 98 656 531 27 622 493 21.87

Others 103 706 739 94 044 491 9 662 248 9.32

The Greens 20 409 109 10 406 605 10 002 504 49.01

The Nationals 16 114 060 10 338 157 5 775 903 35.84

One Nation 3 023 689 632 780 2 390 909 79.07

Total 434 806 728 320 085 549 114 721 179 26.38

Source: Parliamentary Library analysis of AEC data.

The laws around disclosure of donations make it relatively easy to donate an aggregate amount greater than the disclosure threshold to a political party but not have that donation disclosed. The most straightforward way to do this is for a donor to make separate donations at or below the disclosure threshold to each of a party’s state and territory branches. For a party with branches in

Undisclosed funding sources in Australian federal politics: a quick guide 4

each state and territory, this means a single donor could donate a (maximum) total of $112,000 (eight x $14,000) without being required to disclose the donations.

In addition, the provisions of the Act that relate to political party annual returns require the party to declare any donation where ‘the sum of all amounts … is more than the disclosure threshold’ (subsection 314AC(1)), but that ‘in calculating the sum, an amount that is less than or equal to the disclosure threshold need not be counted’ (subsection 314AC(2)). So, for example, 25 individual donations of $10,000 in one year to one party—$250,000 in aggregate—would not count as being above the disclosure threshold, and would not need to be reported by the party. The requirement for reporting by individual donors is more stringent as the Act requires that a donor must report donations ‘totalling more than the disclosure threshold’ (section 305B). But if a donor to a party did not comply with this, and the party concerned did not disclose the aggregate amount received from that donor because it was not required to, the AEC would have no way of knowing about the donor in order to pursue them for compliance.

How effective is the disclosure threshold? While the AEC’s donor disclosure return form specifies the amount of the disclosure threshold for the given year, a large number of donors elect to complete a return and list donations that are well below the disclosure threshold. Donors have disclosed donations of as little as $1.

Since 2006-07, below-threshold donations to political parties disclosed by donors have averaged $5.45 million per year (an average of 23 per cent per year of total disclosed donations) (see Table 2 below). The 2018-19 financial year appears to be an outlier due mainly to the unusually large donations received by the United Australia Party in the reporting period. As noted above, donors are required to declare below-threshold donations if the total amount of their donations exceeds the threshold, and most (although not all) of the disclosures set out below are due to this requirement.

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Table 2: Donor returns donations below the disclosure threshold, 2006-19 Financial Year Threshold

amount ($) Below threshold disclosed ($) Total disclosed

($)

Below

threshold (%)

2006-07 10 300 4 950 298 18 077 096 27.38

2007-08 10 500 5 891 279 26 484 088 22.24

2008-09 10 900 3 546 389 12 437 390 28.51

2009-10 11 200 3 603 430 13 367 801 26.96

2010-11 11 500 5 886 113 27 797 959 21.17

2011-12 11 900 3 660 553 12 929 886 28.31

2012-13 12 100 5 214 448 19 664 286 26.52

2013-14 12 400 7 021 860 58 539 100 12.00

2014-15 12 800 4 917 540 24 082 643 20.42

2015-16 13 000 8 580 588 31 041 252 27.64

2016-17 13 200 4 034 911 15 425 763 26.16

2017-18 13 500 5 629 735 19 242 277 29.26

2018-19 13 800 7 920 599 121 476 994 6.52

Total 70 857 743 400 566 535 17.68

Source: Parliamentary Library analysis of AEC data.

The $70.86 million in disclosed below-threshold donations over the period 2006-19 (approaching 18 per cent of total donations disclosed by donors in the same period) gives an indication of how much money enters the system in this way.

An examination of the detailed donor returns also suggests that some donors are declaring donations that political parties are more likely to record as ‘other receipts’. For example, a number of donors have disclosed donations for attendance at dinners. A party, for its return, might consider that the money paid to attend a dinner does not constitute a donation as a meal was provided in return, and hence records the money as an ‘other receipt’. In evidence to the Parliament the AEC has stated that that Act is not clear on the handling of these situations and that this has been a longstanding issue.

Conflicting and occasionally contradictory rules, both within the federal disclosure regime and in the interaction of the federal rules and state/territory rules, also serve to lessen the effect of the federal disclosure threshold.

In a 2019 decision (Spence v. State of Queensland) the High Court of Australia ruled that federal political donations in Queensland were subject to Queensland’s political finance laws, including its $1,000 disclosure threshold, and that all donations above the $1,000 threshold must be disclosed under the Queensland donations disclosure regime. The AEC Transparency Register currently lists

389 donations that have been declared under the federal regime from returns from political parties located in Queensland for the 2018-19 financial year, totalling some $3.4 million according to Library analysis. In contrast, the Electoral Commission of Queensland’s donations register lists 2,745 donations that have been declared under Queensland’s lower threshold disclosure regime for the same period totalling $9.2 million. While some of these donations will be for state

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purposes (and hence not required to be disclosed federally), given that there was no Queensland state election in that period, some proportion will likely be federal donations that were below the federal disclosure threshold and thus not reported on federal returns.

The Spence decision leaves open the possibility that other jurisdictions, almost all of which have much lower disclosure thresholds than the federal scheme (see Table 3 below), could follow Queensland’s lead and require federal donations to be disclosed under the state schemes also. This would effectively circumvent the federal disclosure threshold, rendering it arguably redundant. However, even in the absence of Queensland-like legislation in the other jurisdictions, the significant discrepancies between the federal and state/territory disclosure thresholds is likely to be a source of confusion for donors.

Table 3: Donation disclosure thresholds in Australian jurisdictions Federal NSW Vic. SA(a) Qld Tas.(b) WA ACT NT

Gift disclosure threshold

14 000 1 000 1 020 5 381 1 000 N/A 2 500 1 000 1 500

Disclosure threshold indexed?

Yes No Yes Yes No N/A Yes No No

Note: Values as of February 2020, or the most recent as published by the relevant authority.

(a) Applies to political parties that have opted into the SA public funding scheme (all of the major and well-known minor parties at the 2018 state election).

(b) Tasmania currently relies on the federal political finance regime and does not have a separate state regime.

Source: Parliamentary Library analysis of electoral commission websites.

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Appendix A: Total party receipts by type by year (2006-07 to 2018-19) Financial Year Donations

Received

Other Receipts

Public Funding

Other/

unspecified(a) Undisclosed Total Receipts

2006-07 25 915 879 25 961 659 13 328 352 3 125 238 66 937 227 135 268 355

2007-08 45 770 653 53 805 207 51 055 041 3 676 900 60 695 790 215 003 591

2008-09 20 112 894 18 689 424 6 150 224 4 171 638 49 591 036 98 715 216

2009-10 16 334 826 27 865 588 2 101 014 217 165 45 198 206 91 716 799

2010-11 40 680 523 53 917 969 65 647 667 29 176 67 851 659 228 126 994

2011-12 12 618 718 42 673 640 17 135 920 6 002 192 51 985 016 130 415 486

2012-13 20 605 174 38 182 296 19 106 322 0 76 277 040 154 170 832

2013-14 64 893 639 66 679 857 57 897 291 612 799 88 794 590 278 878 176

2014-15 29 544 318 53 814 265 31 809 694 1 374 650 67 195 956 183 738 883

2015-16 32 519 727 54 589 702 11 073 669 0 91 176 638 189 359 736

2016-17 14 572 348 54 834 739 79 103 793 74 990 59 986 159 208 572 029

2017-18 17 816 426 46 316 532 21 211 041 4 200 68 773 111 154 121 310

2018-19 130 925 969 98 809 831 90 211 667 138 082 114 721 179 434 806 728

Total 472 311 094 636 140 709 465 831 695 19 427 030 909 183 607 2 502 894 135

(a) Includes receipts listed as ‘subscriptions’, present in a small number of returns, and receipts that were declared but were unclassified.

Note: The undisclosed amount was calculated by subtracting the sum of the disclosed items from the total disclosed receipts, and does not account for double-counting of intra-party transfers that may be listed as other receipts. This means that the table likely underestimates the total undisclosed amount.

Source: Parliamentary Library analysis of AEC data.

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