Commonwealth electoral reforms: implications for business

With national reforms to Australia’s political donations and electoral funding and disclosure regime commencing on 1 January 2027, now is the time for business to ensure their compliance regime has been refreshed and updated. The new regime, which will apply to Commonwealth elections and political activity, is complex. The reforms will significantly restrict electoral donations, accelerate disclosure obligations and increase the compliance burden on businesses who participate in the political process. 

Reforms to the Commonwealth Electoral Act 1918 (Cth) (Electoral Act) were passed by the Federal Parliament on 13 February 2025 and were originally scheduled to come into effect on 1 July 2026. On 1 April, the Commonwealth Government delayed the start date of the reforms to 1 January 2027, providing additional valuable time to business. The changes were implemented by the Electoral Legislation Amendment (Electoral Reform) Act 2024 (Cth) and affect the laws around electoral donations and electoral expenditure.

The changes occur amidst a heightened period of political activity in Australia and broader global geopolitical developments. At a time when business is already focussed on managing risk and awareness associated with global events, as well as confusion with state-based political donations and electoral law requirements, the new regime is an additional burden for business.

Key changes affecting businesses

There are four principal changes that will affect businesses who engage in the political process by making donations.

First, donors will be required to disclose political donations over $5,000 (previously $16,900), with the threshold to be indexed annually. This brings the Commonwealth position closer to most states and territories, which generally require disclosure around $1,000. The penalty for failing to make disclosure will be the greater of 60 penalty units (currently $19,800) or three times the value of the donation.

Second, caps on donations have been introduced for the first time.

• Annual gift cap – it will be unlawful to donate more than $50,000 (to be indexed annually) to a single party, elected representative, candidate, significant third party or associated entity in a calendar year. Each of the state, territory and federal branches of a party are treated separately. However, donations to parties and the candidates they endorse will be aggregated. 
   
• State and territory gift cap – donations to parties, candidates or elected officials connected with any one state or territory will be aggregated. It will be unlawful to donate more than $250,000 in a calendar year in respect of each state or territory (this amount is calculated as five times the annual gift cap, so is effectively indexed annually)
   
• Overall gift cap – it will be unlawful to donate more than $1,600,000 per donor in a calendar year (this amount is calculated as 32 times the annual gift cap, so is effectively indexed annually).

The caps will reset after the conclusion of an election cycle meaning that, in an election year, the maximum amount that can be donated is effectively doubled. Separate caps also apply during the election period for by-elections and Senate-only elections, but these donations do not count towards the three ordinary gift caps described above.

The penalty for breaching a donation cap is the greater of 200 penalty units (currently $66,000) or three times the amount by which the cap was exceeded. 

Third, donations will need to be disclosed more quickly. Ordinarily, they must now be disclosed by the 21^st day of the month following the donation (instead of up to 24 weeks under previous legislation). However, donations must be disclosed with seven days if they are made:

• in an election period (beginning when the writs are issued and ending when polls close);
   
• in the expedited notice period (beginning on the Saturday before polling day and ending seven days after polling day). However, recipients of donations in this period must make disclosure within 24 hours, so businesses should expect their donation to become public very quickly.

Fourth, limits will be introduced on the amount of expenditure that can be incurred for electoral purposes by candidates and political parties. There will also be a cap of $11.25 million on electoral expenditure by others who seek to influence how electors vote (third parties, significant third parties and associated entities).

Implications and next steps for businesses

The commencement of the new laws has been delayed for six months until 1 January 2027. This gives businesses a final opportunity to seek legal advice and bring themselves into compliance with the new regime.

Many businesses which routinely make political donations will find themselves required to disclose those donations for the first time. Others will find that their ability to donate is severely limited and may wish to restructure their donations to maximise the amount they can give. For example, there is an open question as to whether the business forums operated by the major parties can continue to operate in their current form given that membership fees often exceed the new gift cap. Businesses should review their political engagement and electoral donations policies accordingly

Some aspects of the reforms are already the subject of constitutional challenge, with litigants arguing that the measures impermissibly burden the implied freedom of political communication. These proceedings may result in elements of the reforms being further amended or invalidated. The new laws are highly complex and most businesses who participate in the political process would benefit from legal advice.

Finally, with Commonwealth and state and territory political donations and electoral law regimes imposing significant penalties on business, including, in some cases, directors themselves, it is important to be organised. With the electoral regulators expected to show an increased appetite for investigation and enforcement, it is vital that businesses ensure that their own policies and procedures are updated and in compliance with the new regime.