The New South Wales state election is only a few weeks away and for those who have made a political donation (or are thinking of making one last minute), now is the time to focus on the recent changes to political donations laws in New South Wales.
Donations for this year’s state election are governed by the new Electoral Funding Act 2018 (NSW). With new legislation in place, there are a number of considerations businesses need to bear in mind with regards to political donations.
Eight considerations for business
- There are different political donations laws in different jurisdictions. As a rule of thumb, if the party, candidate or campaigner to which you are donating is registered with the NSW Electoral Commission, the NSW Act likely applies.
- Political donation laws apply to political parties, candidates and third-party campaigners. A third-party campaigner is an individual or entity who incurs electoral expenditure of $2,000 or more for a State election during the six months or so before an election, or is an entity registered as a third party campaigner. It is also important to note that donations to ‘associated entities’, which are entities that operate solely for the benefit of one or more registered parties or elected members, must be disclosed.
- Donations of $1,000 or more are ‘reportable’. This includes multiple donations from one donor to the same recipient totalling $1,000 or more. Reported donations are published on the NSW Electoral Commission website, meaning they are publicly available and searchable.
- Donations will include both monetary and non-monetary donations as well as gifts-in-kind and the provision of services. The purpose of the donation is irrelevant.
- Assessing whether a payment is a donation can be tricky. For example, attending a political party function where the cost of the ticket is significantly greater than the value of the meal or services received will be considered a donation.
- Companies who are related under the provisions of the Corporations Act are considered to be one single entity. Consequently, business should be aware that donations need to be calculated across the entire corporate group to determine whether disclosure is required.
- Donations to registered political parties or groups are capped at $6,300 and donations to all other recipients are capped at $2,800 for the 2018/2019 financial year (the cap is CPI-indexed). There are also effective caps on ‘indirect’ campaign contributions, which include providing office equipment for no or inadequate consideration or paying the electoral expenditure of a political party, elected member, group or candidate.
- Businesses and individuals who are ‘prohibited donors’ cannot 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 – are also prohibited from making donations.
How to report a political donation
If your business has made a reportable donation, there is an obligation on both the donor and the recipient to report that donation to the NSW Electoral Commission.
Your reporting obligation will depend on whether the donation was made before or after 1 October 2018.
For donations made on or after 1 October 2018, these are considered to be donations in the ‘pre-election period’, and accordingly your business must report donations of more than $1,000 within 21 days of making the donation by completing a ‘Pre-election period disclosure’ form.
For donations made before 1 October 2018, that is, donations made outside the ‘pre-election period’, the standard disclosure rules apply. The standard disclosure rule is if your business has made a donation(s) of more than $1,000 during the period of 1 July to 30 June, then it must complete a ‘Major Political Donor disclosure form’ by 20 October of the following financial year.
How to manage the legal risks
The role of political donations in politics is a topical issue and there may be reputational issues for businesses who opt to make a donation. 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, or intentionally breaching the donations cap, is punishable by a fine up to $44,000 and/or 2 years imprisonment.
The legal risks associated with political donations can be easily managed by following a few key steps:
- If you’re 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 are aggregated.
- Take ownership of the reporting/disclosure process and report promptly at the start of each new financial year or during the pre-election period.
- Proactively seek advice on your disclosure obligations if needed.
Making a political donation can be a strategic investment. By following good due diligence procedures, businesses can be confident in making donations to parties, candidates and third-party campaigners in the March 2019 NSW state election without risking their good name and reputation.