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Labor senator Sam Dastyari admits he ‘made a mistake’ by accepting money from a Chinese company to cover a travel bill. AAP/Dean Lewins

Dastyari resigns, but will Labor’s proposals fix the political donations system?

Labor senator Sam Dastyari has resigned his shadow frontbench position after a week-long saga over a Chinese company having covered his travel expenses. This payment led to questions about his support for China in the South China Sea dispute in defiance of Labor policy.

These issues have sparked concern about foreign political donations and the effect these might have on Australian democracy. The question is whether such donations might lead to politicians being swayed by their foreign benefactors to favour and support foreign policy positions that conflict with Australian interests.

In response to these issues, Labor leader Bill Shorten has proposed a package of reforms to Australia’s political donations system.

The pernicious influence of money on politics is a problem of political donations more generally, not just from foreign donors. Investigations from the New South Wales Independent Commission Against Corruption have shown that politicians have been willing to act corruptly based on donations from local entities, such as property developers, as well.

What are the problems with the political donations system?

Australia’s political donations system is fragmented across the country and can be easily evaded.

This is because money can be channelled through different jurisdictions to avoid disclosure. Donations can be made through “associated entities” to disguise the true donors.

Also, donations are published only once a year, long after elections are over and the donations were made.


What has Labor proposed?

First, Labor is looking to ban foreign donations. It also wants to ban anonymous donations of more than A$50. In addition, Labor proposes to reduce the disclosure threshold for corporate donations from the current $13,200 to $1,000.

Labor is also proposing to ban donation splitting, which allows various organisations to provide donations to different branches of political parties and so effectively hide the overall donation and the donor’s identity.

Labor wants real-time reporting of political donations, rather than just disclosure once a year. Queensland has already committed to real-time reporting by the end of the year.

Labor also proposes to link public funding to campaign spending. Candidates with enough first-preference votes are allocated a certain amount of public funding for election campaigns. Labor’s proposal will ensure the funding is actually used for the campaign, rather than for other purposes.

Finally, Labor wants to increase penalties for breaches of the rules.

Will this fix the system?

Labor’s proposed reforms are definitely a good step forward in terms of transparency and timeliness.

The increased disclosure requirements and ban on donation splitting will allow donors to be more clearly identified. It will also reduce the loopholes in the system that the NSW Liberals have exploited. They used an associated entity, the Free Enterprise Foundation, to disguise donations from donors banned in the state, such as property developers.

Real-time disclosure of political donations is also desirable. It will increase the timeliness of disclosure and allow for public scrutiny at the time of the donation.

A ban on foreign-sourced donations may ease concerns about any undue impact of foreign interests on policy. But any ban must be carefully circumscribed to avoid infringing constitutional limitations, such as the freedom of political communication.

Increasing penalties for a breach may act as a deterrent. But it’s even more important that these breaches are discovered and enforced. It is thus incumbent on the regulators to ensure they regularly monitor and vigilantly prosecute any breaches.

Other potential reform options could be to impose a yearly cap on donations to each party and candidate. For example, NSW has a yearly cap of $5,800 per party and $2,500 for candidates. This could be combined with an increase in public funding for election campaigns to reduce the reliance on and influence of private political donations.

Australia’s political donations system is out of step with community expectations. The rules are too lax and can be avoided. Labor has made some commendable recommendations for reform and it is now up to the government to heed the call for change.

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