Australia: NSW Liberal Party denied public funding because of donation disclosure breaches

Last Updated: 8 May 2016
Article by Ian Robertson and Sarah Butler
Most Read Contributor in Australia, September 2017

On 23 March 2016 the NSW Electoral Commission (Electoral Commission) released a statement that it had decided that the Liberal Party of Australia (NSW Division) (NSW Liberal Party) was ineligible for its current claim for public funding of approximately $4.4 million from the Election Campaign Fund for the 2015 State Election and from the Administration Fund for the fourth quarter of 2015, on the basis that it had failed to disclose the identity of all major political donors in its 2011 declaration to the Electoral Commission.

In relation to the decision, the Chair of the Electoral Commission, the Hon Keith Mason AC QC, stated that:

Integrity and public confidence in the electoral system are vital.  The election funding and disclosure scheme promotes campaign finance transparency ... Parties seeking public funding must play by the rules.

A brief background: what happened and what are the rules?

The NSW Liberal Party established The Free Enterprise Foundation (Foundation) in 1981.  The Electoral Commission states in its Summary of Facts relevant to its decision that "the Foundation commenced to be used well before 2010 as a means of offering anonymity to favourably disposed donors wishing to support the [NSW] Liberal Party".

The Election Funding, Expenditure and Disclosures Act 1981 (NSW) (EFED Act) requires parties, members, groups, candidates and third-party campaigners such as trade unions and lobby groups to disclose the receipt of reportable political donations to the Electoral Commission in accordance with section 92 of the EFED Act.  A declaration of disclosure must cover a specific disclosure period, being each 12 month period ending on 30 June.  Relevantly, a person who makes a political donation during a relevant disclosure period that exceeds $1,000 is a major political donor and such a donation constitutes a reportable political donation under section 88(2) of the EFED Act. 

On 26 September 2011 the NSW Liberal Party lodged its declaration in relation to reportable political donations received for the period of 1 July 2010 to 30 June 2011.  This declaration included donations received from the Foundation on 16 August 2010 ($94,000), 22 December 2010 ($171,000), 23 December 2010 ($358,000 and $64,000) and 24 December 2010 ($100,000).  

In 2014 the Independent Commission Against Corruption (ICAC) commenced "Operation Spicer" for the purpose of investigating allegations that certain members of Parliament and others corruptly solicited, received and concealed payments from various sources in return for certain members of Parliament and others favouring the interests of those responsible for the payments.  Oral and documentary evidence provided in the Operation Spicer inquiry and published on the ICAC website disclosed that the sources of the Foundation's donations were a series of individual donors.  In its Summary of Facts, the Electoral Commission states that most of these individual donors were considered major political donors who required disclosure under the EFED Act.

On 11 February 2016, the Electoral Commission contacted the NSW Liberal Party to inform it that the Electoral Commission had considered the evidence published by the ICAC and that, following its own inquiries, it considered that the donors and their corresponding donations should have been individually disclosed to the Electoral Commission.  The Electoral Commission asked the NSW Liberal Party for submissions on this issue and for an amended declaration that disclosed the relevant details of the major political donors in question. 

There was a series of correspondence between the NSW Liberal Party and the Electoral Commission during early 2016 in which, in summary, the NSW Liberal Party contended that a disclosure in the requisite form had been lodged and that its adequacy in terms of detail was irrelevant to the decision of the Electoral Commission as to whether to withhold its public funding under the EFED Act. 

The Electoral Commission's decision

The Electoral Commission concluded that there were "significant breaches of the election funding laws" and that until the NSW Liberal Party's disclosure was rectified, the Electoral Commission was required to withhold payments for claims by the NSW Liberal Party from the Electoral Campaigns Fund and the Administration Fund, in accordance with sections 70(1) and 97L(1) of the EFED Act.   In summary, those sections provide that a party or elected member is not eligible for any public funding payment or administrative and policy development funding payment where there has been a failure to lodge a "requisite declaration" under Part 6 of the EFED Act. 

Reasons for the Electoral Commission's decision

In reaching its above decision the Electoral Commission concluded that:

  • The Foundation was not a validly-constituted charitable trust because the purposes of the money which it controlled were not exclusively charitable in the eyes of the law.  When the Foundation paid money to the NSW Liberal Party in 2010 as disclosed to the Electoral Commission, the Foundation was merely acting as an agent for the original donors.
  • Accordingly, instead of disclosing the Foundation as the donor, the NSW Liberal Party should have disclosed the individual donors in its declaration if the sums involved made them "major political donors" under the EFED Act. 
  • In any event, section 85(1)(d) of the EFED Act was engaged.  This section provides that a gift made to or for the benefit of an entity (which was, according to the NSW Liberal Party, the Foundation) which was used or intended to be used by the entity to enable the entity to make directly or indirectly a political donation is itself a political donation.  The Electoral Commission concluded that section 85(1)(d) applied for two reasons. First, because the gift was actually used by the Foundation to make a donation.  Secondly, because the gift was intended to be used by the Foundation to make a political donation.

The Electoral Commission's statement and relevant information, including correspondence with the NSW Liberal Party in the lead-up to the Electoral Commission's decision, is located here.  The Electoral Commission has stated that the purpose for it releasing this information on the Electoral Commission's website "is to assist with increasing public awareness about the work of the Commission, to understand how and why this decision was made and demonstrate to the public that NSW's electoral laws are enforced". 

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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Ian Robertson
Sarah Butler
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