‘Loophole’: State and federal political donation caps need alignment, expert says

By Jackson Graham

December 21, 2021

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There are a number of surprises in the department secretary changes, yet all of the appointments are solid. (BISURJADI/Adobe)

Caps on state political donations could fall short of their aims without a limit on federal political donations, says a law expert who describes Australia’s legislation as a “patchwork” needing tightening. 

Yee-Fui Ng, an associate professor at Monash University who has advised the Victorian and NSW electoral commissions, said that while state caps on political donations had taken a step towards improving “political equality”, there was still work to be done. 

“The loophole is that there is no cap at the federal level,” Ng told The Mandarin. “So what you might see is that people might channel their donations to the federal level instead of donating to the state branches.” 

The Mandarin revealed last week that the Victorian Electoral Commission was investigating potential cases of under-reporting of political donations after the laws came into effect three years ago. 

The allegations include failures to provide disclosure returns, donors providing false or misleading information, and donors failing to provide an annual return.

Ng pointed out the potential for state branches to receive funding above the cap if used for federal electoral purposes. 

If they say it is for the federal election or something like that, it sort of circumvents the laws,” she said. “That’s one weakness of having a system that is a patchwork across the country.” 

In Victoria, not disclosing political donations used for state electoral purposes can result in a 10-year jail penalty under laws that came into effect in 2018. An independent review is set to consider the effectiveness of the laws following the 2022 election.

The NSW Independent Commission Against Corruption concluded an investigation in 2016 that NSW Liberal Party members evaded donation laws ahead of the 2011 state election by using a foundation to channel prohibited donations to the party for the state election. 

Ng said similar situations could be committed by any political party and were difficult to trace. “If subjects channel it through entities, it’s sometimes quite hard to work out where the money is going to and coming from,” she said. 

She believes caps are the best system available because they mean parties have incentives to seek donations from a broader range of donors without becoming captive to a small pool of interest groups. 

“It is the idea of political equality. That Joe and Jane down the street have an equal voice to a miner who can donate millions of dollars to a political party,” Ng said. 

“The idea is if you donate millions to a party, you are more likely to get access to ministers and you’re more likely to get influence and a spot at the table.”


READ MORE:

Donations for influence at the heart of Australian politics

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