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Legal challenge expected over Premier’s political donations ban

Premier Peter Malinauskas has unveiled details of a promised ban on political donations but says it will likely face a High Court challenge.

Jun 13, 2024, updated Jun 13, 2024
Photo: Tony Lewis/InDaily

Photo: Tony Lewis/InDaily

Malinauskas spoke at the Bob Hawke Prime Ministerial Centre on Wednesday night to outline for the first time his government’s pre-election promise to ban all political donations.

The Malinauskas Government has been working on draft laws since coming to office in March 2022, with the Premier admitting earlier this year that progress has been slow due to a suite of constitutional issues the ban could face.

“Drafting this legislation has been complicated,” the Premier said today.

“It is important that we try and draft bills of this nature in a way that contemplates a range of possibilities and permutations, but also contemplates what a High Court might view about this type of reform.

“That has necessitated us taking our time, but we’re now in a position to be able to release this legislation publicly for open consultation.”

The government’s draft Electoral (Accountability and Integrity) Amendment Bill 2024 breaks down into three parts:

  • a ban on political donations to registered political parties, MPs, groups and candidates
  • a restructured public funding system to compensate for lost donation revenue, and
  • a mandatory expenditure cap for all parties and candidates.

The ban would outlaw all donations and “gifts” to parties, MPs, groups and candidates as well as any loans (except those from financial institutions).

This ban includes union affiliation fees – a significant source of funding for the Labor Party – but does not apply to party membership fees, which will be capped at $100 a year.

The ban will also not apply to newly registered political candidates and parties. Instead, they will be subject to a donations cap of $2700 to ensure they are not disadvantaged in the political process.

Peter Malinauskas

Premier Peter Malinauskas has called for tighter political donation laws since at least 2012. Photo: Tony Lewis/InDaily

The government has also proposed reducing the statewide cap on how much political parties can spend on campaigns from around $5 million to $4 million.

The cap would also become mandatory for all political parties and candidates, rather than the current opt-in scheme for parties to receive public funding.

The government has allocated around $2.9 million in additional public funding next financial year to help political parties compensate for the loss in donations and continue to run their administrative functions.

Political parties and candidates will also be entitled to “advance payment” of around 60 to 80 per cent of their allocated public money ahead of elections.

Further, political parties must keep “very clear separate accounts” between their state and federal branches to prevent federal parties bankrolling state-level campaigns.

State-level party accounts containing public money will be independently audited and must be directed towards state-level campaigns, with money not able to flow between state and federal accounts.

Malinauskas has publicly supported tighter political donation laws since at least 2012 when he was state secretary of the Shop Distributive and Allied Employees Association (SDA).

The union, which is the power base of Labor’s dominant Right faction, contributed $94,001 in affiliation fees to the ALP in the first half of 2023 – the biggest contribution of any union, association or individual for that reporting period.

“I can’t overstate the fact that this is not consistent with my government’s own political interests,” Malinauskas said, adding that the policy was “a bit of a crusade”.

“Only on Friday last week we had one of the best attended party fundraising events that the Labor Party’s ever had.

“But that doesn’t change my principled view that we should have a level playing field when it comes to the political process.”

The legal standing of South Australia’s donations ban could hinge on the High Court’s interpretation of the implied right to freedom of political communication in Australia’s constitution.

Political donation caps imposed on unions in New South Wales have faced successful challenges in the High Court on the basis of infringing this implied constitutional freedom.

Special Minister of State and Independent MP Dan Cregan, who was given oversight of the donations ban from Attorney-General Kyam Maher earlier this year, said the ban “will be opposed by sectional interest groups and lobbyists who would prefer to retain the current system”.

“This is an ambitious reform – it will face challenges, including legal challenges,” Cregan said.

“The government’s taken the very best advice, but there is a thicket of legal principles that we need to navigate through.

Dan Cregan

Independent MP Dan Cregan may have to campaign under a new funding model at the 2026 state election. Photo: Tony Lewis/InDaily

“And of course, we’re also looking to ensure that there’s a consensus if that possibly can be achieved in the Parliament of South Australia.”

Malinauskas said the government intends to introduce the laws to parliament before the end of the year and pass them before the 2026 state election.

Businesses, unions free to campaign under draft laws

The government’s draft laws do not prohibit a business group or a union from running its own campaign on a particular issue during an election.

This means campaigns like the banking sector’s push against the Weatherill Government’s bank tax, or the Ambulance Employees Association’s $400,000 election campaign against the former Marshall Government in 2022, could still proceed under the new laws.

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Malinauskas said he would have liked to have banned these campaigns in the draft legislation and the government was still open to suggestions during the public consultation.

But he said banning union and business campaigns would be more difficult constitutionally.

“Our bill seeks to control what we know we reasonably can, and that is the practice of political parties raising funds,” Malinauskas said.

“In terms of third-party campaigns, any regulation of that activity starts to go into a difficult territory legally and constitutionally given those High Court rulings in the past.

Dr Rob Manwaring, associate professor at Flinders University’s College of Business, Government and Law, said the Malinauskas Government’s draft laws were “a really bold initiative”.

“This would probably be one of the tightest and most restrictive donations schemes in the world,” he said.

“This really would put South Australian front and centre in leading the charge in really trying to tighten the influence of money and politics.”

But Manwaring also raised concerns that third party campaigns by unions or business are not covered by the new laws, meaning it “might not deal with the issues of dark money stringently”.

“There’s no reason why a company can’t, for example, campaign on a particular thing,” he said.

“So a charity, for example, might well say we’re really concerned about mental health strategies and the government of the day’s policies are not very effective and we take out a centre page ad in The Advertiser or InDaily to promote that campaign.

“And in one sense, that’s part of and parcel of just a political discourse.

“I think this goes back to the constitutional question about money. [Most] likely the High Court… would be quite happy for individuals to make donations, but they probably might consider being a bit tighter around businesses.”

The Liberal Party has benefitted from generous donations – some totalling nearly $450,000 over a financial year – from Chinese businesswoman Sally Zhou.

Defence contractors and property developers – including Walker Corporation and Pelligra Group – have previously tipped into the Liberal cause, while the SA branch of the Australian Hotels Association has been a lucrative fundraising source for both major parties.

A breakdown of some of the top donors to each party can be found here.

Premier to keep fundraising until rules change

Meanwhile, the Premier said he would keep fundraising for the Labor Party until the rules around donations change.

Malinauskas said he attended a post-budget function on Friday for the Labor Party’s fundraising arm, SA Progressive Business.

Asked if this would invite cynicism from the public, Malinauskas said: “We have to keep fundraising until such a point that we know we’re not allowed to.”

“I can’t predict what the outcome of this legislation will be in the parliament.

“Make no mistake, political parties… it’s a competitive process and I will compete to the rules of the game that are before us.

“I think the rules should change, but for as long as the rules are in place we’ll play to those rules – and play hard.”

The Premier said SA Progressive Business will have to “fundamentally change” if the legislation passes, with fundraising functions set to be outlawed.

“I haven’t spoken to the party secretary about it, but whatever they do would have to comply with the new law should it come into existence,” he said.

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