Australia: Political donations for the March 2015 NSW state election: Know the rules before digging deep

With the next New South Wales state election just six months away – and ICAC scandals seemingly a daily phenomenon – now is the time for businesses to check their knowledge of NSW's political donations laws.

Laws governing political donations differ between Federal and State, and amongst the States, so it pays to know what you can and can't do rather than run the risk of a penalty fine, or worse, a media scandal that taints your company's reputation.

SIX KEY FACTS FOR BUSINESS

If you are considering making a political donation in NSW in the lead up to the state election next March, it's worth remembering these six key facts about political donations laws in that state.

  1. Political donation laws apply to both political parties and third-party campaigners. A third-party campaigner is an individual or group who intends to use donation to make a further political donation or to incur election campaign expenditure.
  2. Donations of $1,000 or more are "reportable". This includes both monetary and non-monetary donations and multiple donations from one donor to the same recipient totalling $1,000.
  3. Businesses who make a "reportable donation" must report the donation to the NSW Election Funding Authority (EFA). This disclosure is published on the EFA's website.
  4. Donations for political parties are effectively capped at $5,700 and for third-party campaigners at $2,400 per donor. For political parties, the capped amount is the aggregate of all donations made, so if a business is donating to multiple candidates of a political party, total donations are still capped at $5,700.
  5. A donation can only be accepted from an individual who is on the electoral roll or an entity with an ABN or any other number allocated by ASIC.
  6. Businesses and individuals who are "prohibited donors" can not make political donations. Prohibited donors are property developers, the tobacco industry and the liquor and gambling industry, as well as representative organisations for those industries. Remember, "close associates" of prohibited donors – including directors and officers and their spouses of businesses in these industries – are also prohibited from making donations.

HOW TO REPORT A POLITICAL DONATION

If a business has made a reportable donation, there is an obligation on both the donor and the recipient to report that donation to the Election Funding Authority. This involves completing a "Disclosure of Political Donations for a Major Political Donor" form and lodging it with the EFA.

The EFA works on the financial year. If your business has made a donation of more than $1,000 between 1 July and 30 June, then that donation must be disclosed to the EFA between 1 July and 20 October of the next financial year.

THE RISK FOR BUSINESS

A flick through the major daily newspapers demonstrates the reputational risk of being involved in a political donations scandal. Reputational risks aside, failing to comply with political donation laws has other serious consequences

Not lodging a disclosure is an offence under NSW law and carries a maximum fine of $22,000. Even more severe, making a false statement in a disclosure is also punishable by a fine up to $22,000 and/or 12 months imprisonment.

MANAGING THE RISKS

The legal risk associated with political donations can be easily managed by following a couple of key steps:

  • if you are concerned that you or your business might be a 'prohibited donor', seek advice before you make a donation;
  • keep your own records of what donations are made and to whom, remembering that donations can be both monetary and non-monetary; and that donations to multiple candidates of one political party are aggregated – the $5,700 cap applies whether you make a series of smaller donations or one big donation; and
  • take ownership of the reporting/disclosure process and report promptly at the start of each new financial year.

Making a political donation is a strategic investment for any business. By following good due diligence procedures, businesses can be confident in making donations to parties, candidates and third-party campaigners in the March 2015 NSW state election without risking their good name and reputation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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