Local Government elections in NSW will be held on Saturday, 4 September 2021. This is one year later than originally scheduled due to Covid-19.1
Political donations and electoral funding expenditure for Local Government is legislated by the Electoral Funding Act 2018 (NSW) (Act).
The Act introduced caps on electoral expenditure for Local Government elections in 2018. These reforms were widely expected and foreshadowed in 2016 when caps on political donations were expanded beyond the State regime to include Local Governments.
Although introduced in 2018, the expenditure caps were substantially amended in 2019.2 This will be the first election period with these expenditure caps taking effect.
The legislation is constantly being amended and it is important for Local Government candidates to be aware of current caps and reporting requirements to avoid inadvertently being in breach of the law.
The laws applying to political donations for Local Government elections and councillors are found in Part 3 (Divisions 2, 3 and 5) of the Act and are regulated by the NSW Electoral Commission (Electoral Commission).
Political donations made at the Local Government level to parties, candidates, groups of candidates and third-party campaigners have been capped since 2016 in NSW.
Donations may be monetary or non-monetary in nature. Indirect campaign contributions are also captured and include the value of free or discounted goods and services. For example, if a candidate uses a vehicle not owned by him or her during the election campaign, the value of the use of the vehicle is to be shown as a political donation (unless a payment is made by the candidate that reflects that value).3
Political Donations or Indirect Campaign Contribution Caps
It is unlawful to accept a political donation that exceeds the applicable donation cap in any one financial year.
Political donation caps are found in s23 of the Act. They are indexed for inflation. For the current 2020-2021 year the caps are table below.
|A registered party or group of candidates||$6,600|
|An unregistered party (or party registered for less than 12 months)||$3,000|
|A councillor (including incumbent mayor)||$3,000|
|A third party-campaigner4||$3,000|
|An associated entity5||$3,000|
Since January 2020, it is unlawful for a person to make or accept a political donation in the form of cash over $100 (including aggregated amounts that equal or exceed $100). Anything over this amount must be made electronically or by cheque.
Exempt Political Donations and Indirect Campaign Contributions
Contributions made by a candidate to finance their own election campaign are not political donations and are not subject to donation caps. However, one ought to be careful, as contributions which are in excess of $50,000 made to a party by a candidate who is a member of the party is a political donation and will be subject to the donation caps6 –and are not covered by the exemptions in s26 of the Act.
Other exemptions include:
- party membership fees less than $2,000;
- party levies paid by a Councillor or candidate who is a member of the party;
- a political donation in excess of the cap is exempt if it is paid into an account kept exclusively for federal election campaigns; and
- a political donation to a third-party campaigner, in excess of the cap is exempt, only if it is not paid into the third-party campaigner's campaign account.
Despite the table above, it is unlawful to accept donations from some people or specific industry groups, including their close associates. The consequences of knowingly making or accepting an unlawful donation may be severe and may include prosecution. Prohibited donors are
- Property developers;
- Tobacco entities that manufacture or sell tobacco products;
- Liquor entities that produce or sell liquor products; and
- Gambling entities that enable wagering or betting, including manufacture of gambling machines.
Reporting and Disclosure
Accurate and complete financial records and a receipt and acknowledgment book must be kept by political parties, councillors and candidates. A receipt must be issued for all monetary donations received and an acknowledgement must be issued for all non-monetary donations received.
All donations are to be disclosed to the Electoral Commission. A reportable political donation, being a donation of $1,000 or more (or aggregated donations equal to $1,000 or more) in any one financial year must also be reported to the Electoral Commission by the donor, who is deemed a major political donor7.
A reportable political donation for a local government election is to be disclosed within 4 weeks of the end of the half year within which the political donation was made.8
The laws applying to electoral expenditure are found in Part 3 (Divisions 3 and 5) of the Act.
There is a long list of items caught by the definition of electoral expenditure9 and include expenditure on advertising (e.g. newspaper ads, posters, how to vote cards); the production and distribution costs of election material; and employing staff engaged in election campaigns, but excludes volunteers. There are caps on electoral expenditure for local government election campaigns and these are found in s31 of the Act, tabled below. They apply for the period from 1 July 2021 until the end of the election on 4 September 2021.
|Number of enrolled electors for a local government area or ward||Non-mayoral candidates (and groups that do not include mayoral candidates)||Mayoral candidates in undivided areas (and groups that include mayoral candidates)||Third –party campaigners|
|1 – 5,000||$6,000||$7,500||$2,000|
|5,001 – 10,000||$10,000||$12,500||$3,340|
|10,001 – 20,000||$18,000||$22,500||$6,000|
|20,001 – 30,000||$25,000||$31,250||$8,340|
|30,001 – 50,000||$36,000||$45,000||$12,000|
|50,001 – 75,000||$46,000||$57,500||$15,340|
|125,001 or more||$72,000||$90,000||$24,000|
For Local Government Areas divided into wards, the cap for a candidate for mayor (or a group that includes a candidate for mayor) in a local government area is determined by a the formula, being
100% of the cap of a non-mayoral candidate in a ward of the area + 25% of the non-mayoral candidate cap for every other ward in the area.
By way example, in an LGA with 4 wards of between 30,001 – 50,000 voters per ward, the cap for a mayoral candidate (or group that includes mayor candidates) will be $36,000 (for ward 1) + $9,000 (for ward 2) + $9,000 (for ward 3) + $9,000 (for ward 4), equating to $63,000.
If a candidate is running for mayor and councillor at the same time, the applicable cap is the cap for a mayoral candidate.
The re-use of electoral campaign material from one election to the next is excluded from the expenditure cap, but must be disclosed to the Electoral Commission.
Third-party campaigners cannot act in concert with another person or persons as a means to increasing their collective cap.
Exemptions of Electoral Expenditure
Guidelines for these are determined and issued by the Electoral Commission. Examples of excluded expenditure include:
- minor payments less than $50;
- annual subscriptions to newspapers;
- flowers and gifts to office staff; and
- child care payments
Reporting and Disclosure
Complete and accurate records (that relate directly or indirectly to electoral expenditure) must be kept of electoral expenditure including copies of accounts or receipts and copies of advertising and printed election material. Payments for electoral expenditure must be paid from the campaign account.
Electoral expenditure is to be disclosed to the Electoral Commission annually and within 12 weeks of the end of the financial year, by 22 September. This is the case even if no expenditure has been incurred in the prior financial year.
1 s318B Local Government Act (NSW) allows for postponement of Local Government elections
2 Following the recommendation of the "Inquiry into the impact of expenditure caps for local government election campaigns" prepared by the Joint Standing Committee on Electoral Matters, report 4/56 – October 2018
3 Found in NSW Electoral Commission website: Home -> About Us -> Legislation -> Funding Legislation -> Guidelines
4 A third party campaigner means a person or another entity (not being an associated entity, party, Councillor, group or candidate) who incurs electoral expenditure for a Local Government election during a capped local government expenditure period that exceeds $2,000 in total
5 An associated entity means a corporation or another entity that operates solely for the benefit of one or more registered parties or elected members.
6 Section 26(5)
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.