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The final disclosures of political donations to be published before the election show the source of more than half of the money is hidden by loopholes. By Hannah Ryan.

How political parties hide the source of their donations

Visy executive chairman Anthony Pratt and Prime Minister Scott Morrison.
Visy executive chairman Anthony Pratt and Prime Minister Scott Morrison.
Credit: AAP / Paul Braven

The most generous donation given to the Victorian branch of the Liberal Party last financial year came from a company few would have heard of outside political circles.

The Cormack Foundation – which handed over $272,129 to the state branch – was established in 1988 to benefit the Liberal Party. Reportedly, it has tens of millions of dollars in its coffers.

Returns published in the Australian Electoral Commission’s yearly data dump on Tuesday reveal that in the 2020-21 financial year nearly $3 million came into the Cormack Foundation, while $9.7 million flowed out.

More than $400,000 of that income came from shares held in BHP. About $600,000 came from holdings in Rio Tinto. Hundreds of thousands also came from Wesfarmers and the Commonwealth Bank.

On the other side of politics, there was a generous donor in Labor Holdings Pty Ltd, based in Brisbane and first registered in 1959.

The Queensland branch of the ALP reported receiving donations from the company amounting to $2.5 million. The company also handed over $220,000 that was not classified as a donation.

Returns shows that the company had $3 million in income that financial year and made $4.7 million in payments.

Hundreds of thousands came into the company through dozens of separate transactions from Labor’s Queensland branch and from stockbroking and wealth management firm Morgans Financial. But, like the Cormack Foundation’s income, Labor Holdings’ disclosure doesn’t reveal what any of those cash injections are for.

The Cormack Foundation’s company secretary, Peter Matthey, told The Saturday Paper that 100 per cent of the company’s income is dividends from publicly listed companies and that the company has never received donations.

It poses an interesting question, one of many asked by the country’s loose disclosure laws: if one of the largest donors to a political party is a so-called “associated entity” wholly dependent on the profits of listed corporations, what does that mean for the way the government treats those corporations? And where did the money under investment come from in the first place?

Each February, the electoral commission publishes a huge set of disclosures from political parties, closely associated companies and unions, donors and campaigners, setting off a flurry of news articles announcing who the biggest donors were.

This year, the top individual donor was billionaire Anthony Pratt, whose Pratt Holdings Pty Ltd gave nearly $1.3 million to the Liberal Party and $10,000 to Labor.

Pratt’s largesse has raised eyebrows for the fact that his multinational company, Visy, was given a $10 million grant from the federal government’s bushfire recovery fund in the same financial year.

Notable, too, was his preference this year for the Liberal Party, when previously both major parties could expect roughly equal donations. Pratt himself chose to attend Bill Shorten’s election party the night Scott Morrison unexpectedly won the 2019 election.

Big donors such as Pratt Holdings dominated the returns, with analysis from the Centre for Public Integrity think tank finding that 10 donors alone were responsible for almost a quarter of all donations, which totalled $17.9 million. This raises uncomfortable questions about what kind of influence money can buy in politics.

Environmental groups were quick to point to the prominence of resources companies on the lists of donors, too. More than $2 million went to the Liberals, Nationals and Labor from gas, oil and coal interests, according to the Australian Conservation Foundation. Woodside Energy alone doled out $232,350 to the major parties. Campaigning group 350.org Australia took the opportunity to call for an end to political donations from fossil fuel companies, saying their donations are attempts to buy support and shore up their future.

 

What the focus on the top donors and donations can obscure, however, is how little the annual data actually tells voters.

“The ones that are the big headline donations are often not the biggest donations, they’re just the ones that didn’t hide it,” says Australian politics researcher Lindy Edwards.

In the past financial year, political parties took in $177 million. For the major parties, however, declared donations made up only 9 per cent of their income, according to analysis from the Grattan Institute.

Two-thirds of the money going to parties is really a mystery, says Grattan Institute researcher Kate Griffiths. That’s thanks to a constellation of loopholes in Australia’s federal election laws – the weakest in the country.

While parties have to declare their total income in the returns they file to the AEC, they only have to spell out the source of sums greater than $14,300 – although some, including federal Labor, choose to give more detail. Anything below that is so-called “dark money”. So while the Coalition had $63 million in private income in the past financial year, the source of 62 per cent of it is completely unknown, according to the Grattan analysis. For Labor, 43 per cent of their $47 million in income was undisclosed.

 

Even when we know where funds are coming from, researchers looking at money in politics say we don’t know enough. The Cormack Foundation and Labor Holdings aren’t private donors like Pratt. They’re classified as “associated entities”, which means they’re controlled by, or operate for the benefit of, a political party.

More than a third of political parties’ income comes from associated entities, making them the largest category of donor, says the Centre for Public Integrity’s executive director, Han Aulby. That means that to work out who’s really funding political parties – and who might be gaining access or influence with their money – we need to look at how the associated entities are making their money.

Some of these groups are investment vehicles, such as the Cormack Foundation. Others are “shady business arms” of the parties, Aulby says, and the source of their funds and profits is far from clear.

Aulby pored over 22 years of AEC disclosures and found that the Cormack Foundation was the Coalition’s biggest benefactor, giving more than $62 million in funds, or 12.48 per cent of total donations. That’s far more than Anthony Pratt, who was the sixth-most-generous donor with $8.2 million. In total, 41.78 per cent of Coalition donations – $195 million – came from associated entities.

The largest source of ALP income between 1998-99 and 2019-20 was associated entity ALP Holdings Pty Ltd, which was responsible for $58.6 million, or 10.4 per cent of the total. Another party-controlled company, John Curtin House, was responsible for $9 million, or 8.7 per cent of total income.

“These organisations that no one’s heard of are actually funding the majority of our political parties,” says Aulby. “It doesn’t feel very democratic to have organisations [where] we don’t know who’s involved or how they’re making money.”

The Grattan Institute’s Kate Griffiths says the “associated entity” category encompasses a lot. It might be a pure investment vehicle, or a more active fundraising organisation, or something else entirely. But, she says, “virtually none of them have a public presence that will tell you what their purpose is”. It’s left to researchers and journalists to read between the lines.

The lack of transparency is made worse by the minimal disclosures required of these entities and the parties they support.

Like parties, associated entities have to declare money coming in that exceeds the disclosure threshold of $14,300, plus their total income and expenditure. They must also declare if a sum is a political donation, a term that has a very narrow legal definition. That leaves a lot of money that’s either not declared at all or labelled as an “other receipt” rather than as a donation.

Generally, experts say, the slim definition of “donation” means even things such as tickets to fundraising events can be classified as an “other receipt” if they’re not deliberately priced just below the disclosure threshold, avoiding disclosure altogether. But “other receipts” can also be legitimate income, such as interest on an investment or a property sale.

“As researchers, we can’t say with any confidence what an ‘other receipt’ is for,” says Alice Drury, a senior lawyer at the Human Rights Law Centre.

“It could be a membership fee, which is effectively a donation dressed up as something else… We don’t know if it’s rent, if it’s dividends from shares. We don’t know if it’s shady other contributions that could have a corrupting influence.”

 

Pratt’s money went to the Liberal Party the simple way: as a donation, given directly to the party, declared by both, then written up in news headlines around the country.

But these overlapping loopholes – a high disclosure threshold, the use of associated entities to fund parties, the broad bucket of “other receipts” – mean money can flow into and through politics in other ways that are much more difficult to track.

“There are clues,” Griffiths says. “You can put a lot of time and energy into tracing this stuff and you can find some things. The main problem is you can’t be sure that you’ve found the major donors.”

And that’s what’s important, she says. Big donors are the ones who are likely to get the most access and influence over party decisions. “Just being a major donor might mean that somebody picks up your phone call, and no normal Australian could expect that level of access to political decision-makers,” Griffiths says.

The calls for reform have been clear and loud for some time. Reformists want caps on donations and caps on election spending to cool down the need to fundraise. They want the disclosure threshold drastically lowered. They want disclosure to happen in real time, instead of the strange situation where donations from July 2020 have only been revealed this week. And they want more details about what “other receipts” entail.

Without these changes, experts say, policy and regulation may be distorted by the power of vested interests. So far, however, the calls for reform have gone unheeded.

“They could absolutely make this process clear and transparent if they chose to,” Edwards says. “They choose to make it really opaque.” 

 

Ahead of the election, The Saturday Paper surveyed readers on which issues they wanted to see covered in more detail. This piece is the first in a series based on your responses.

This article was first published in the print edition of The Saturday Paper on February 5, 2022 as "Dark money and receipts".

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Hannah Ryan is a journalist for AAP, writing here as an independent contributor.

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