Being a political player: Risks to navigate in electoral advertising requirements

With 2019 being an election year there will be a significant increase in political donations being made to candidates, political parties and special interest groups. The recent changes to the Commonwealth Electoral Act 1918 (the CEA) have manifestly changed the definition of “electoral matter”, and since this phrase is the legislative “hook” for obligations and disclosures required by the CEA, it is important to be aware of how these changes affect your potential involvement in political advocacy.

Political Campaigner Registration

The CEA has amended the definition of “electoral matter” to matter which has a “dominant purpose of influencing the way voters vote”. The risks associated with the subjectivity of the dominant purpose test, and the fine distinction between a publication being “public education” and an “electoral matter”, should prompt entities to consider whether they need to register as a political campaigner under the CEA. If the electoral expenditure of an entity has:

  • exceeded $500,000 in any one of the previous three financial years; or
  • exceeds over $100,000 during the current financial year,

the entity must register as a “political campaigner” within 90 days of exceeding the threshold or risk civil penalties of $42,000 and in some circumstances up to three times that amount.

Foreign Interest Electoral Reform

Parliament has tightened the rules regarding foreign donations and entities should be conscious of these rules particularly where their cash flow includes international revenue streams. Entities that:

  • were incorporated in Australia; or
  • have their head office in Australia; or
  • have their principal place of activity in Australia,
  • do not qualify as foreign donors.

It is highly unlikely that an Australian entity will face any issues where their cash flow includes international revenue streams. Indeed subsidiaries of foreign companies directly fall within the scope of the exceptions to what is a “foreign donor” under the CEA. However an issue can arise where the foreign entity “gives” to its Australian entity a sum which is:

  • for the purposes of incurring electoral expenditure; or
  • for the dominant purpose of creating or communicating electoral matter; or
  • a political “gift”.

Further, where a “scheme” was thought to exist for the purpose of avoiding CEA restrictions, then the receipt of the “gift” or “expenditure” will have infringed the prohibition against foreign donations. Therefore an Australian subsidiary that funded a political gift or electoral expenditure would be well advised to ensure that it did so from its own profits (where those profits were derived from Australian activities or activities that had Australia as its head/principal office).

Other salient changes to be aware of:

  1. The reworking of existing advertising material will be treated as new. Material for each variation must be separately authorised and a “paper trail’ must be kept for each authorisation.
  2. There also is a dominant purpose test for reportable “expenditure”. This test, if managed, will make the distinction between “research” and the creation or publication of the advertisement clearer.

The new regime is intended to be protective of the public putting the onus of a pro-disclosure regime on entities incurring expenses that may be related to electoral matters. Entities interested in making donations or publishing views should explore and consider their legal liabilities before doing so.

If you have any questions or concerns about your obligations under the CEA, get in touch with our Business law team.

Written by Mark Love with the assistance of James Connolly and Riley Berry.