Investigation: how political donations protect a cosy loophole for Australia’s plutocrats

by | Dec 27, 2020 | Government, Secret Rich List Featured

“Political donations buy access to parliamentarians, they buy policy outcomes, and they buy a post-parliament career with the revolving door between politics and business”. Stephanie Tran and Michael West investigate the dark money which flows from Australia’s family business empires to the major political parties and identify a raft of failures in the donations system.

Australia’s “cardboard king” and the country’s third-richest person, Anthony Pratt has donated more than $9.1 million to the major political parties over the past two decades. Some 65% ($6 million) went to the Coalition and its associates and 34% ($3 million) went to Labor.

Analysis by Michael West Media found that this breakdown – one-third to Labor, two-thirds to the Coalition – is typical of political party payments from billionaires over a 20-year period.

Over the years, Pratt has enjoyed the political privileges that such donations afford. One is that ten of his companies are part of an elite group that fall under the “grandfathered exemption”, that is the list of 1,119 “Dark Companies” which are exempt from disclosing financial statements. Another is that one of his companies recently got a $10 million grant from the Bushfire Recovery Fund to buy some machinery – more, incidentally, than his Pratt Consolidated Holdings paid last year in income tax.

One of his dark companies, Pratt Holdings, was a significant donor in last year’s federal election, giving $1.59 million to Labor, including $200,000 in “other receipts”; and $1.44 million to the Liberal Party, which included $41,973 that was not listed on the Australian Electoral Commission (AEC) detailed receipts database but was found in the Pratt Holdings original return.

This was one of several irregularities discovered in an extensive investigation by Michael West Media of the dark companies on the grandfathered list – or the Secret Rich List as we have dubbed it because the loophole entitles Australia’s oldest and wealthiest families to a privilege not granted to other Australians: that is, secrecy and freedom from disclosure and transparency.

The Pratt Foundation also donated $55,000 to The Menzies Research Centre Limited, a think tank associated with the Liberal Party.

Political donations and the Grandfathered list

Introduced as a temporary plan by the Keating government, the grandfathering loophole remains in place 25 years on. The exemption means the companies on this list do not have to lodge financial reports to ASIC. This essentially creates two classes of citizens – those who have to declare their financial statements and the 1,119 companies which do not.

The list was to be reviewed a few years after it was established but the Howard government stopped that review. The Rudd-Gillard government also passed laws to limit the exemption, but the Coalition overturned them.

Anthony Pratt

Money and access. Pratt’s trade trip to the US. Source: Wikipedia

As part of our investigation, we compiled the political donations of the companies with the grandfathered exemption, as far back as the 1998-99 financial year. The donations offer insight into the confluence of money in politics, political influence and the continued existence of archaic legislation that serves to protect those who are privileged within our society.

Influence of political donations

The Commonwealth Electoral Act states that political donations are to be made “without consideration in money or money’s worth or with inadequate consideration”. You should not be able to “buy” political access or receive any returns in terms of influence on political outcomes. However, it is difficult to deny the influence of donations over Australia’s political process. When an individual or entity donates millions of dollars to the major political parties, what exactly are they paying for?

Subversion of political process

Australians are consistently in the dark when it comes to who holds the purse strings of the major political parties. This is due to lax political donation laws, with approximately 35% of political funding coming from undisclosed sources. This lack of transparency has enabled more than $1 billion of dark money to fund the major parties since 1999 with little to no accountability.

Former leader of the Greens and a long-time advocate for political donation reform Christine Milne emphasises the subversive effect of political donations.

“Political donations are a corrupting influence on the political system to the point where Australia is no longer a democracy. It is a plutocracy and our parliaments have been bought by corporate vested interests,” she said.

Ms Milne highlights the “revolving door” effect of money in politics. “Political donations buy access to parliamentarians, they buy policy outcomes, and they buy a post-parliament career with the revolving door between politics and business.”

Inside Australia’s Secret Rich List

Failures in AEC disclosures

Michael West Media has uncovered numerous instances of discrepancies in the donation declaration records on the AEC transparency register. These errors were encountered consistently across the political donation disclosures of several entities.

“Other receipts”

The first issue lies in the distinction between a “donation” and an “other receipt”. The AEC defines “other receipt” as amounts that do not fit the definition of “gift” within the Commonwealth Electoral Act. According to a spokesperson from the AEC:

“Whether a disclosed transaction constitutes a ‘gift’ or an ‘other receipt’ is a matter for the party or the entity to determine.”

However, discrepancies regularly appear between how the donor and the political party classify the contribution. For example, according to its 2018-19 return, Pratt Holdings donated $200,000 to the ALP. However, the amount shows up on the AEC database as an “other receipt”. Similarly, in 2015-16 financial year, according to its return, Pratt Holdings donated $270,000 to the Liberal Party. However, the Liberal Party classifies $270,000 as an “other receipt”.

The opacity particularly of amounts classified as “other receipt” remains a pertinent concern within the disclosures. Stephen Mayne, the founder of Crikey and Australia’s top journalist on campaign finance, highlights the lack of transparency in donation disclosures.

“I think it’s deliberately opaque and that the major political parties have over the years conspired to make the disclosure system very clunky and very difficult to aggregate. Definitions are also unclear. One person’s ‘donation’ is another person’s ‘other receipt’. I mean, what a joke is “other receipt”! They should say what it actually is. Is it interest in the bank? Is it rent on a property? What is it?”

High disclosure threshold

In the 2018-19 financial year, the disclosure threshold for political donations was $13,800, which increased to $14,000 in 2019-20. Because of Australia’s high disclosure threshold, donors are inclined to make multiple donations below the $14,000 threshold. Multiple donations below the threshold that are made by the same donor are not aggregated by the AEC, which leaves a significant portion of donations absent from the AEC’s Transparency Register.

Once a year disclosures

Because of the rules around disclosures, donations, if timed “correctly”, don’t have to be disclosed for 19 months. For example, if a donation was made on July 1, 2020, it won’t have to be disclosed until February 1, 2022, as the donation was made in the 2020-21 financial year. By then governments have been elected and the news cycle has moved on.

ANAO Report

Earlier this year the Australian National Audit Office (ANAO) audited the Australian Electoral Commission’s management of financial disclosures. The report found that:

“There is insufficient evidence that annual and election returns are accurate and complete,”

And

“The effectiveness of the analysis undertaken by the AEC is limited. Annual returns submitted by third parties and donors are not analysed.”

The significant number of disparities in the AEC databases we encountered throughout this investigation appear to be a result of lack of scrutiny on the part of the AEC to ensure that returns are accurate and errors are rectified.

Amendment to the Electoral Act

At the end of October, both major parties joined forces to pass an amendment to override stricter state political donations laws. The amendment allows donors that are prohibited under state law, such as property developers, to donate to state political branches provided that the money is for “federal purposes”.

Peas in a pod: Labor, Coalition join forces to weaken political donation laws

The amendment has been widely criticised for its potential to facilitate the laundering of illegal donations.

Ms Milne opposed the amendment, citing the increased opacity that would result.

Christine Milne

“No matter how much Liberal and Labor and the Nationals try to dress up this amendment it is purely and simply money laundering of property development donations to the states via the federal party. It’s a blatant undermining of the states’ attempt to bring greater integrity to donations. The prohibition of property development donations was a great leap forward and Liberal and Labor have now worked together to undermine it.”

“All that will happen is that a property developer will make a million-dollar donation to the federal party and the federal party will generously donate $1 million to its state subsidiary. The two are not connected, they will say. Just a pure coincidence they will say.”

Stephen Mayne: “To allow these landowners to donate to the decision makers on property development is a bit like allowing criminals to donate to judges. No one is allowed to pay judges so why are people allowed to pay decision makers in planning and property development issues?”


Secret Rich List series edited by Elizabeth Minter.

Tomorrow: we roll out the individual billionaire profiles on the Secret Rich List. 

ABOUT THE AUTHOR

Stephanie Tran

Stephanie Tran

Stephanie is studying a Bachelor of Communication (Journalism)/Bachelor of Laws at the University of Technology Sydney. She has a keen interest in public interest investigative journalism and is president of the UTS Journalism Society. As cadet reporter at MWM, she has built our database of grandfathered companies and their political donations.

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