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Legislative Council - Fifty-Second Parliament, Second Session (52-2)
2013-09-26 Daily Xml
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ELECTORAL (FUNDING, EXPENDITURE AND DISCLOSURE) AMENDMENT BILL

Second Reading

Second reading.

The Hon. I.K. HUNTER (Minister for Sustainability, Environment and Conservation, Minister for Water and the River Murray, Minister for Aboriginal Affairs and Reconciliation) (17:01): I move:

That this bill be now read a second time.

I seek leave to have the second reading explanation inserted in Hansard without my reading it.

Leave granted.

In its last term this Government implemented a number of significant reforms aimed at restoring the fundamental principles of accountability, transparency and efficiency in government. The amendments contained in the Electoral (Funding, Expenditure and Disclosure) Amendment Bill 2013 ('Bill') further demonstrate the Government's commitment, introducing a number of significant and overdue reforms to South Australia's electoral laws designed to improve public confidence in the electoral process.

It is evident that community attitudes toward the political process have become increasingly cynical. A general mistrust exists, predominantly as a consequence of the spiralling costs of electioneering, the inherent reliance on private donations to fund political campaigns, and a lack of transparency existing in the financing of such campaigns.

The measures taken in this Bill will improve public confidence in the electoral process, directly addressing these concerns and integrating reforms that will ensure the highest standards of political integrity, accountability and transparency.

The amendments can be broadly categorised into three main components.

The first introduces a voluntary public funding scheme which will partially reimburse political parties, candidates and groups for political expenditure incurred during the campaign period. Specifically, candidates and groups will have the choice of opting into a scheme to receive funding and, as a condition of opting into the scheme, will be subject to prescribed limits on 'political expenditure' during a specified period of time.

The second outlines expenditure caps that will apply to those candidates, groups and parties who choose to opt in. For a general election, limits on expenditure will apply throughout the eight month period prior to polling day. The expenditure caps, in conjunction with public funding, will level the playing field, reducing campaign costs and the need for political fundraising.

The final, and arguably most pivotal of the reforms, is the introduction of a regulatory disclosure scheme, requiring all key political participants, including political parties, their associated entities, candidates, groups and third party campaigners to disclose certain financial information on a regular basis, including relevant details of all gifts and loans valued over a threshold of $5,000.

Unlike other Australian jurisdictions, South Australia currently has no legislative framework requiring financial disclosure. The establishment of a regulated scheme which exposes fundraising activities, will give the community access to meaningful information, and provide effective transparency of the fundraising activities of key political participants.

Third party regulation is a new and important element of this reform. For some time the anonymity that has existed in relation to third party campaigns has been of concern. Electors are not always able to easily identify the source(s) of funding of a campaign and are therefore left unaware of the driving influences behind the information being provided to them.

The Bill does not restrict expenditure of third parties as it does to those candidates, and their parties who may opt in to scheme. However, the Bill subjects third parties to financial disclosure obligations and requires disclosure of political expenditure, providing a framework which will enable the public to identify the contributions made by third parties. The Bill specifies that the amendments will commence on 1 July 2015.

I now turn to the details of the Bill.

Division 2 of the Bill establishes a scheme of reporting agents nominated by political parties, candidates, groups and third parties. A nominated agent establishes a point of contact for parties, candidates, groups and third parties and will facilitate legislative compliance.

Reporting agents will be responsible for ensuring compliance with the disclosure obligations in the Bill, including lodgement of financial and expenditure returns, a responsibility that carries criminal penalties for non-compliance. Any payment of funding will also be made to the agent.

To assist in the regulation of the expenditure and disclosure obligations, the Bill requires agents to establish and maintain a designated campaign account for State campaigns. The Bill requires all gifts to be paid into the account and prohibits parties, candidates and groups making other payments into the account other than those prescribed by regulation. To assist in the administration of relevant spending caps, all political expenditure must also be paid from the campaign account.

Division 7 of the Bill establishes the regulatory financial disclosure scheme, requiring all key participants to disclose, among other financial information, details of gifts and loans received within certain reporting periods that exceed the set threshold of $5,000.

A gift is broadly defined so as to capture a wide range of circumstances, and specifically includes money (excluding annual subscriptions and compulsory levies paid to a political party) and the provision of a service (excluding volunteer labour).

The scheme establishes two reporting cycles, one which applies outside the election period and the other throughout the election period, referred to in the Bill as the 'designated period'. The designated period commences on 1 January in an election year, and ends 30 days after polling day. During this period, the frequency of required disclosure increases considerably.

An annual disclosure period applies to parties, associated entities and third parties outside the designated period. Agents of political parties, third parties and financial controllers of associated entities are required to furnish two returns relating to the financial year, disclosing general financial details, including the total amounts received, total amounts owed and prescribed details of all gifts and loans received, valued above the threshold. This includes details of aggregate amounts received in a single disclosure period.

Unlike parties, non-party candidates and groups will only be required to furnish one return setting out specified details of all gifts received outside the designated period. The reporting period for candidates and groups will vary depending on whether the candidate is a new candidate or a sitting Member.

As of 1 January in an election year, parties, associated entities, candidates and groups will all be required to furnish a return at end of January, and then on a weekly basis thereafter. Again, this includes specified details of aggregate amounts received in a single disclosure period that exceed the threshold.

The continuous disclosure obligations adopted during this period are necessary in the interest of promoting transparency and informed voting. The timeframes for furnishing returns ensure there will be no lag between transactions being entered into and their disclosure. In order to augment the effectiveness of such disclosure, the Commissioner will be required to make the details of gifts received publically available for inspection on a website as soon as reasonably practicable.

In addition to this, the Bill requires immediate disclosure of large gifts received by political parties. Accordingly, if a political party receives a gift that exceeds the value of $25,000, the party will have seven days to furnish a return to the Electoral Commissioner that includes information such as the name and address of the donor and other prescribed details.

Donors will also be required to furnish returns relating to gifts made. Their reporting periods mirror the entity they donate to, with the exception of the designated period. Upon receipt of a gift that requires the donor to lodge a return, an agent is obliged to inform the donor of their disclosure obligations.

The short-comings of disclosure schemes often relate to inadequate or insufficient information being disclosed, and most significantly, infrequent disclosure and late release dates for returns.

No other State jurisdiction requires the same frequency of disclosure leading up to polling day. The proposed reforms will ensure that every voter will be able to see the significant donations that have been made to every party before they cast a vote.

Further to this, the Bill addresses the issue of the purchase of political access. Both the major political parties in South Australia have been accused of raising funds by selling political access. Many in the community object to such practices, seeing them as an exclusive forum for discussions that only those in attendance are privy to. This perception is reinforced by the price of tickets.

The Bill will not inhibit the right of parties to raise funds through access events. It will not prevent those who wish to obtain access via these events from doing so. However, the Bill will make it unlawful to receive an amount of money exceeding $500 per person for entry into such an event.

Notwithstanding the prohibition on anonymous gifts valued over $200, the Bill does not place any restrictions on the amounts that can be donated, nor does it restrict who may make donations. Such restrictions carry an inherent risk of offending the implied freedom of political communication under the Constitution. Great care has been taken when drafting this Bill to minimise the risk of a challenge both in relation to the regulation of gifts and the application of expenditure limits.

Consequently, rather than imposing limits on expenditure on all persons and organisations incurring political expenditure, the Bill establishes a voluntary system of public funding in which those opting in will be required to comply with political expenditure limits during the capped expenditure period, which commences on 1 July and ends 30 days after polling day. The alternative scheme of imposing limits on expenditure on all persons and organisations has been rejected.

To 'opt in' to the scheme, agents of candidates and groups must lodge a certificate before a specified date. Party agents and agents for non-party members of parliament must lodge a certificate in relation to a candidate at least 24 months prior to polling day (this may be done, in the case of a party, even though a particular candidate has not been pre-selected). However, an agent of a non-endorsed candidate who is not a sitting MP or a non-party group that does not have a sitting MP as a member must lodge a certificate before 5pm on the day on which the capped expenditure period commences.

Funding is allocated on a 'per vote' basis. To be eligible a candidate or group must obtain at least 4 per cent of the primary vote or be, or have a candidate, who is elected.

Reimbursement is set at a flat $3 per vote for candidates endorsed by a party or group that had a sitting member of parliament going into the election or independent candidates who were sitting members of parliament going into the election, and $3.50 per vote for the first 10 per cent of the primary vote gained, and $3.00 per vote of the primary vote gained above 10 per cent, for all other candidates. These amounts will be indexed annually in accordance with the CPI.

Funding based on electoral support is the most equitable basis for calculating the eligible funding. The tapered scheme adopted in the Bill advances political equality by boosting the finances of legitimate minor parties and reduces the significant financial advantage afforded to major parties in circumstances where one blanket figure is applied to a primary vote.

To address concerns of profiteering, a provision has been inserted into the Bill that enables the Electoral Commissioner to withhold funding if an amount of political expenditure incurred is less than the amount of public funding payable, or if the Commissioner is unable to adequately determine the amount of expenditure that was incurred. For expenditure incurred by a party or party candidate, the provision applies if the total amount of expenditure incurred by the party and party candidates was less than the total funding payable.

New section 130ZA sets out the different 'applicable expenditure caps' that apply to each participant. This is to recognise the political circumstances and nature of the different participants, ensuring the appropriate application of expenditure limits. The applicable expenditure caps will be indexed annually in accordance with CPI and are as follows:

Registered political parties

For a registered political party that is endorsing candidates for election in the Legislative Council only, a party cap of $500,000 applies.

A registered political party endorsing candidates in 1 or more House of Assembly districts is allocated a cap of $75,000 per district contested. For example, if a political party endorses candidates in 47 seats, the party will have a cap of $3,525,000. It should be noted that part of this cap must be allocated to a party candidate. If the party also endorses candidates in the Legislative Council, the party will receive an additional cap of $100,000 for each candidate (up to a maximum of 5 candidates).

This is intended to provide registered political parties with an additional 'state-wide cap' in recognition of the fact that political parties will conduct general political campaigns across the State of South Australia in addition to candidate specific campaigns.

There is no expenditure cap for a Legislative Council party candidate. Expenditure incurred by a candidate for the Legislative Council is taken to be expenditure incurred by the party.

Party candidate—House of Assembly

A party must allocate an amount (up to $100,000) of the party cap to each candidate for election in the House of Assembly. This allocation becomes the party candidate's applicable expenditure cap. The amount can be agreed between the agent and the candidate. If no agreement is reached, the assumed allocation is $40,000.

The Bill requires a copy of the agreement to be provided to the Electoral Commissioner.

The mandated maximum of $100,000 for a party candidate is designed to avoid significant overspending by parties in marginal electorates. To facilitate this policy aim, clause 130ZC requires an agent to ensure that the expenditure cap allocated to the candidate, and the expenditure incurred, relates to the election of the candidate only.

It is envisaged that the party cap will be used for 'general' electoral matter, whereas the candidate's cap will be used for electoral matter specific to a candidate and that district. There is an interpretive provision which provides that electoral matter 'relates' to a House of Assembly candidate if it:

expressly mentions the name or displays the image of a candidate seeking to be elected in the district or expressly mentions the name of the district; and

is communicated to the electors in the district; and

is not mainly communicated to electors outside the district.

Non-party candidate—House of Assembly

The applicable expenditure cap for a non-party candidate contesting a seat in the House of Assembly is $100,000.

Non-party candidate/groups—Legislative Council

The applicable expenditure cap for a non-party Legislative Council group is $500,000 and $125,000 for a single candidate.

An agent is responsible for ensuring that expenditure is not incurred in excess of the applicable cap. If a party and/or candidate/group exceed their applicable expenditure cap, an amount of funding payable to the agent will be significantly reduced (by an amount equal to 20 times the amount of which the cap was exceeded). The Bill also contains a penalty provision (clause 130ZD) which applies directly to the agent, in the event they fail to ensure the applicable cap is not exceeded.

The strict consequences of an expenditure breach are necessary to compel compliance. Without appropriate and effective limits on political expenditure, public funding will fail to reduce reliance on private donations and merely contribute to expanding budgets, fuelling political overspending.

The definition of political expenditure in the Bill is deliberately broad, primarily relating to expenditure on the 'expression of views' on a political party or an issue in an election, producing material that requires the inclusion of authorisation details, and undertaking opinion polling and research.

The fact that expenditure limits apply to parties, candidates and groups only, raises concerns in relation to the operation of third parties and the potential for them to be used as an avenue by parties and candidates to circumvent expenditure caps.

To mitigate this risk the Bill contains a provision prohibiting a person from entering into an agreement or arrangement with a third party to incur political expenditure for the purpose of avoiding a cap. If found in breach of this provision, an agent will be guilty of an offence attracting a maximum penalty of $25,000. Once again, this strict approach is necessary to compel compliance and ensure established expenditure limits are effective and enforceable. The agent will also risk losing part or all of the entitlement to the funding.

All key participants will be required to furnish returns relating to political expenditure incurred during the capped expenditure period. Disclosure of expenditure by parties, candidates and groups enables the Electoral Commissioner to adequately determine the amount a party, candidate or group has spent for the purpose of enforcing relevant expenditure limits in addition to assessing whether or not they have acted in agreement or arrangement with a third party. It also provides a level of transparency to the public who will be able to inspect expenditure returns.

In addition to expenditure returns relating to the capped expenditure period, all participants, and persons incurring expenditure of more than $5,000 will be required to furnish an annual return outlining details relating to the political expenditure incurred. Persons incurring expenditure of more than $5,000 will also be required to furnish a return disclosing gifts received and used in whole or part, to incur political expenditure.

Clause 130ZW will require that all financial and expenditure returns be accompanied with an auditor's certificate. I note that in some circumstances an auditor's certificate may be provided at a later date with the permission of the Electoral Commissioner.

To assist political parties in meeting the proposed disclosure requirements, assistance funding will be provided to political parties for administrative expenditure incurred in complying with the Legislation. However, the assistance funding will only be made for expenditure that is actually incurred. A political party will not be paid 'in advance'.

The amount of assistance funding available will be $7,000 in the case of a party with 5 or fewer Members of Parliament and $12,000 in the case of a party with 6 or more Members of Parliament. Claims for assistance funding will also require an audit certificate.

This is an historic initiative. It is designed to address an extensively documented cynicism about special interests and financial interests that has plagued politics in other jurisdictions. Sunshine is the best disinfectant. The public will welcome transparency, openness and accountability in political campaigning, especially at times when politicking is at its height. The Parliament should welcome such initiatives.

I commend the Bill to Members.

The explanation of clauses will be included by the Office of Parliamentary Counsel.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

3—Amendment provisions

These clauses are formal. The commencement clause provides that the Act will come into operation on 1 July 2015.

Part 2—Amendment of Electoral Act 1985

4—Insertion of Part 13A

New Part 13A sets out a scheme for the disclosure of campaign donations.

Part 13A—Election funding, expenditure and disclosure

Division 1—Preliminary

Division 1 sets out various definitions required for the purposes of the Part. A number of the definitions have been taken from the Commonwealth Electoral Act 1918. The objects of the Part are provided for. This Division also provides that nothing in the Part requires the disclosure of details required to be furnished to the Australian Electoral Commission under Part 20 of the Commonwealth Electoral Act 1918.

Division 2—Agents

Division 2 provides for the appointment of an agent for an appointing person or body (defined as a registered political party, candidate, group or third party that appoints an agent) for the purposes of this Part. A registered political party will be required to appoint an agent. A candidate who has not appointed an agent will be taken to be his or her own agent. If the members of a group are all endorsed by the same registered political party, the agent of the party is the agent of the group. A third party that is a natural person who has not appointed an agent will be taken to be his or her own agent. Each member of the executive committee of a third party that is not a natural person and which has not appointed an agent will be taken to be the agent of the third party.

Certain processes with respect to the appointment of agents are set out. Division 2 also provides that the Electoral Commissioner will establish and maintain a Register of Agents. Processes to terminate the appointment of agents are set out. The Electoral Commissioner must be given notice of the death or resignation of an agent. Particular provision is made such that each member of the executive committee of a registered political party is to assume responsibility for the obligations of the party under this Part, including in a situation where there is no agent for the political party.

Division 3—State campaign accounts

Division 3 requires the agent of a registered political party, candidate, group or third party to keep a State campaign account. The Division provides for the regulations to prescribe what amounts may, or may not, be paid into a State campaign account kept by the agent of a registered political party, candidate or group. It also provides that agents must ensure that the registered political party, third party, candidate or group on behalf of which the State campaign account is kept does not pay an amount of money for political expenditure unless the amount is paid from its State campaign account.

Division 4—Public funding of candidates and groups for elections

Division 4 provides for public funding for elections. Candidates and groups are to receive funding based on the number of first preference votes received at elections.

No funding is payable to a candidate or group unless the candidate or group received at least 4% of the total primary vote in the relevant election or the candidate, or (in the case of a group) a member of the group, is elected.

Furthermore, no funding is payable unless the agent of a candidate or group has lodged a certificate agreeing to be bound by the applicable cap on political expenditure under the Part. The Electoral Commissioner must also be provided with satisfactory evidence of political expenditure of at least the amount of the funding to be paid (otherwise the amount of funding payable is to be reduced, or, if no evidence is provided, not to be paid).

If a person to who Division 6 applies exceeds their applicable expenditure cap under that Division, the funding amount payable to the person's agent is to be reduced by 20 times the excess amount (or will be reduced to nothing if the excess amount is actually greater than the amount of funding that would otherwise have been payable).

Division 5—Special assistance funding for political parties

Division 5 provides for special assistance funding for registered political parties for administrative and operational expenditure. Parties are to receive half yearly funding if at least 1 member of the party is a member of Parliament during the relevant half yearly period, the party was registered at the last general election and continues to be registered and the party's agent lodges a claim with the Electoral Commissioner. Claims must set out administrative expenses incurred during the period. Funding is paid for those expenses, up to a maximum (which varies depending on the number of members of the party in Parliament).

The Division prohibits the use of special assistance funding for political expenditure.

Division 6—Limitations on political expenditure

Division 6 provides for expenditure caps during the capped expenditure period (which is defined) for a registered political party, candidate or group that adopts an expenditure cap (by lodging a certificate with the Electoral Commissioner). As stated above, adopting an expenditure cap for an election entitles the adopting candidate or group (or, in the case of a candidate or group endorsed by a political party, the agent of the party) to payments for public funding in relation to the election (if relevant requirements under Division 4 are met).

Applicable expenditure caps for an election are fixed under the Division. The caps vary based on different factors, such as whether a candidate or group is endorsed by a registered political party or not, or whether the election is a general election or any other election. A party, candidate or group must not exceed the applicable expenditure cap during a capped expenditure period.

Division 6 also makes provision in relation to political expenditure by registered political parties and candidates that relates to the election of a candidate (an expression that is defined). In addition, a third party and a registered political party, candidate or group are prohibited from entering into an agreement for the third party to incur political expenditure during a capped expenditure period for the purposes of the party, candidate or group avoiding its applicable expenditure cap. Breach of the provision will result in the commission of an offence by the registered political party, candidate or group.

Division 7—Disclosure of donations

Division 7 sets out the requirements for the provision of returns by the agent for a candidate or group in relation to gifts and loans received during the disclosure period for the election. A return will be required to be furnished to the Electoral Commissioner at the prescribed times and must set out information specified in the Division. However, a return need not set out any details about a gift or loan of an amount or value of $5,000 (indexed) or less, or a private gift or loan to a candidate or group.

The Division will require a person who makes a gift or gifts of more than $5,000 (indexed) to a candidate or member of a group, or a relevant entity (defined as a registered political party, an associated entity or a third party) during the disclosure period to also furnish a return. A loan or loans to a candidate or member of a group of more than $5,000 (indexed) must also be disclosed.

Registered political parties must disclose 'large gifts' within 7 days of receipt.

The Division will also require relevant entities, candidates and groups to ensure that they know the names and addresses of people who make gifts the amount or value of which exceeds $200 (or a greater amount prescribed by regulation) or loans exceeding $1,000 (or a greater amount prescribed by regulation).

The Division also prohibits registered political parties from receiving an amount of money of more than $500 for entry to a relevant event (which is defined).

Division 8—Returns

Division 8 will require registered political parties, associated entities (as defined) and third parties to file financial returns at the prescribed times, including the particulars prescribed by the regulations.

The Division also requires registered political parties, candidates, groups and third parties to file expenditure returns for the capped expenditure period within 60 days after polling day for an election.

The Division will require a person who has incurred political expenditure totalling more than $5,000 (indexed) (or $10,000 (indexed) for third parties) in any financial year to also furnish a return for the financial year. In addition, the Division will require a person who is required to furnish such a return to furnish an additional return for the financial year in respect of gifts received by the person which were used during the financial year to enable the person to incur political expenditure or to reimburse the person for incurring political expenditure (provided that the amount of at least 1 such gift was more than $5,000 (Commonwealth indexed)). The Division also specifies that returns are not to include lists of party membership.

Division 9—Related matters

Division 9 includes provisions that ensure returns provided under the Part by relevant entities, candidates and groups are accompanied by an audit certificate. The Division also provides that members of the public can inspect any return filed under the Part and that will require the retention of certain records, as well as various powers of investigation for the purposes of the Part.

The Division also provides that, in the event that a person is unable to provide all information required to complete a return, the Electoral Commissioner will be able to require persons to provide information to assist in the preparation of a return. The Division also sets out a procedure for the amendment of a return. A decision of the Electoral Commissioner to refuse a request for an amendment will be reviewable under the Act. The Division provides for various offences in connection with the operation of the Part.

Division 9 also provides that a failure to comply with a requirement of the Part in relation to an election does not invalidate the election.

5—Amendment of section 139—Regulations

This clause amends section 139 to include certain regulation making powers for the purposes of the Act, including the power to fix fees, the power for a matter or thing in respect of which regulations may be made is to be determined according to the discretion of the Electoral Commissioner, and the power for the regulations to modify the application of proposed Part 13A in relation to the disendorsement of a candidate by a registered political party or for savings or transitional purposes.

Debate adjourned on motion of Hon. J.S.L. Dawkins.

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