Written by Han Aulby, executive director at the Centre for Public Integrity. Originally published in the Age Feb 15 2022

This week’s revelation that Independent MP Zali Steggall did not disclose the source of a $100,000 donation from the Kinghorn Family Trust shows that the problem of hidden money in politics goes beyond the major parties.

Research from the Centre for Public Integrity shows that the source of $1.38 billion in political party income has been hidden since 1999. In the last financial year alone the source of $68 million was hidden. This equates to 38.6 per cent of total party income.

Come election time, voters will have no way of knowing who is funding our political parties and candidates.

The bulk of this hidden money is below the disclosure threshold. The Commonwealth has the highest threshold in the country, requiring only donations over $14,500 to be disclosed. Most states require donations over $1000 to be disclosed. This should be implemented across the board.

But other means of hiding the source of donations is also used. The AEC compliance review into Warringah Independents Ltd – the fundraising entity backing Zali Steggall’s political campaign – found evidence of donation splitting. A donation of $100,000 was publicly disclosed within the total amount of donations received, but no details about the donor were shown. “The donation of $100,000 from The Kinghorn Family Trust to Warringah Independent Ltd consisted of eight individual donation amounts from Kinghorn family members,” it read.

These individual donations of $12,500 were below the disclosure threshold but “one cheque of $100,000 was given to Warringah Independent Ltd from The Kinghorn Family Trust. Under the Electoral Act, the details of individual receipts exceeding the threshold must be disclosed in the annual disclosure return.” Steggall’s team then amended their annual return to disclose the full details.

This form of donation splitting is illegal under the Electoral Act, but other forms are allowed. If the Kinghorn family members had made the donations in separate cheques from their individual bank accounts, it would be legal. And if the Kinghorn Family Trust had made the donations to multiple branches or organisations associated with Warringah Independents Ltd it would also be legal.

Finding ways around our donations disclosure system is easy. The loopholes are more like canyons.

This, however, does not excuse non-compliance. Independents should be setting an example as they work to hold the major parties to account. With their policy agenda trumpeting integrity and accountability, including Zali Steggall’s support of an integrity commission and truth in political advertising legislation, Independents should make their own funding and conduct transparent.

But more importantly, we need to reform our system to make sure that no MP, Independent or major party, can hide the source of their funding. Our current rules allowed Clive Palmer to spend $80 million on an election campaign. It also allowed $68 million in donations from unknown sources last financial year. We need to wipe the slate clean and build a democratic system of political finance.

Starting with disclosure of donations. All donations over $1000 should be disclosed in real time, not 18 months later. Donations to separate branches should be aggregated. And the definition of donation should be expanded to include any gift that is spent on electoral matter, including income from party fundraising events and corporate sponsorships.

Electoral expenditure should be capped. Clive Palmer should not be allowed to outspend anyone else just because he is a billionaire. We need to stop the political fundraising arms race that leads the major parties prioritising donor relationships over constituents in their electorates.

And we need to cap donations. Our research shows that a small group of millionaire donors are funding over a fifth of major party income. This is undemocratic. Party members and the public cannot compete with the big money currently dominating politics. Donation caps would mean that my donation means as much as yours, which means as much as Anthony Pratt’s, currently the Liberal’s largest donor.

All of this needs to be enforced if it is going to be effective. The Australian Electoral Commission (AEC) did a good job picking up this incorrect disclosure from Steggall, but an Audit Office report in 2020 found that the AEC is only “partially effective” in monitoring compliance. The ANAO reported that the AEC does not use all available data sets or enforcement powers, and that there is no assurance that disclosures are accurate or complete. The AEC needs more resources and powers to enforce donations rules, and we need an independent integrity commission to investigate serious breaches.

Big money in politics can buy access and influence. It can shape policies and win or lose elections. We need urgent reform to stop the flows of cash currently flooding our democracy.

Han Aulby is executive director at the Centre for Public Integrity.