Crossbench in the gun under laws to shut out big money and ‘protect democracy’

Labor will rush ambitious laws that would strip big money out of politics through parliament’s final fortnight, aiming to cut the donations of wealthy individuals such as Clive Palmer and curtail the power of cashed-up teals and Greens hoping to unseat the major parties.

Cross-party deals to thwart the big-spending Americanisation of Australia’s elections have been elusive over the years. However, the Albanese government has confidence in a critical agreement with the opposition that would cap how much a candidate can receive from any individual donor in a year at $20,000 and the total any candidate can spend in a seat during an election campaign at $800,000.

New legislation will reduce the amount of money that can be donated to political parties.Credit: Alex Ellinghausen

The laws will not come into effect until 2026 to offset a potential scare campaign about fiddling with election rules before next year’s poll, and to give the Australian Electoral Commission and parties time to adjust, making it potentially the last at which unlimited cash can be splashed.

Special Minister of State Don Farrell will introduce a bill early next week and Labor hopes to pass the legislation through the Senate the following week before parliament rises for the year, a short timeline likely to fuel teal independent and Greens’ concerns of a secretive major party deal to entrench their dominance.

Crucially, Labor-linked trade unions – along with financially flush interest groups such as Climate 200 and right-wing Advance – will also be subject to the caps, helping smooth the path for a Labor-Coalition in-principle agreement, first reported by this masthead.

The bill has been informed by months of talks on the legally complex proposals that could spark a High Court challenge.

Unions will continue to pay millions in affiliation and membership fees to Labor under the draft legislation.

Senior opposition sources, unable to publicly share confidential deliberations, stressed that a deal was not yet done and remained subject to the will of the Coalition party room.

The opposition still has some reservations about the level of caps, asking taxpayers to compensate candidates for the drop in donations, and the administrative burden of disclosing donations in real-time and naming mum-and-dad donors.

“We won’t be bullied or rushed into this,” one Coalition source said, describing the proposed changes as consequential for how elections would be run and won.

A big catalyst for the push was Palmer’s $60 million advertising campaign, which Labor believed helped kill off Bill Shorten’s 2019 campaign. Palmer also spent $117 million at the last election.

Farrell said the last decade showed that “billionaires repeatedly attempt to sway our elections, not through policy or participation, but through money and misinformation”.

“This significant package of reforms has been drafted to tackle big money in our electoral system and protect our democracy into the future,” he said in a statement.

Under the draft legislation, the drop-off in private campaign cash will be partly filled by more taxpayer funding. Currently, the AEC pays candidates and parties about $3.50 for each vote they receive, with $75 million being paid out for the last election. This figure would rise to $5 per vote, meaning public funding would increase to more than $100 million. The unpopular taxpayer funding of elections has been a sticking point in previous attempts to reform campaign funding.

Pivotal to the proposals is a new cap of $800,000 on how much a candidate can spend in one seat, preventing the types of races seen in electorates such as Kooyong and Wentworth last election in which teal candidates used multimillion-dollar campaigns to unseat Liberals, who also spent millions. The Greens also spent big on a small number of seats.

Candidates or parties will only be able to receive $20,000 from any one donor or business each calendar year. In a measure designed partly to ensure donors cannot claim their constitutional implied right to political communication was impinged, a donor will still be able to donate $600,000 in a year. This means Palmer could in theory give $20,000 each to 30 candidates.

But the cap-per-candidate would mean a wealthy backer of teals, for example, would still only be able to give $20,000 to each of the teal MPs.

Groups such as Climate 200 would still be able to crowd-fund and distribute cash but they would need to prove to the AEC that the money they spread around was truly raised by donors who gave no more than $20,000. Anyone who tries to subvert the rules could face fines or jail.

Crossbenchers have not been briefed on the full detail of the legislation, generating paranoia among independent MPs that Farrell, who has repeatedly emphasised the tradition of the two-party system, was working to cut out smaller players.

Nationally, major parties would be forced to spend no more than $90 million on an election campaign. As a comparison, they received about $200 million in the last financial year, an amount that includes millions in taxpayer funding. It is unlikely under the new laws that they could raise the same amount.

Non-party outfits that try to influence elections, such as unions and lobby groups, would be capped at spending $11 million during a campaign.

Sitting lower house MPs would receive $30,000 and senators $15,000 to deal with the new administrative burden created by the laws (which could not be spent on elections), which would also force party divisions to create new campaign bank accounts auditable by the AEC.

Real-time reporting of donations worth more than $1000 would be included, marking a sharp change from the current regime where disclosure of donations can take up to 18 months after an election.

Labor will also introduce a bill to enforce truth in political advertising but the Coalition and AEC do not support such a law, meaning it is unlikely to pass despite progressive backing.

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