| Published by Jonathan Teh
Since 15 March 2018, the Commonwealth Electoral Act 1918 (Cth) (Electoral Act) has been expanded to require charities to report on their political expenditure.
It is important for all charities to assess whether they must report, particularly in light of the aged care, disability, energy, banking/finance sectors being topical issues for electors at the moment.
Unfortunately, the change is a backwards step for the regulation of charities.
Since 2013, the Charities Act 2013 (Cth) has recognised that it is legitimate for a charity to conduct activities which are aimed at securing or opposing any change to a law, policy or practice in the Commonwealth. In the lead up to the 2016 Commonwealth election, the Australian Charities and Not-for-profits Commission (ACNC) published detailed guidance on what advocacy can be undertaken (eg principled lawful debate on issues) and where a charity crosses the line (eg promoting a specific candidate for political office).
The Electoral Act change complicates this by requiring charities to report on political expenditure. The new reporting obligations can be fairly easily, and even inadvertently, triggered by charities.
What is political expenditure?
“Political expenditure” is defined to include “the public expression of views on an issue that is, or is likely to be, before electors in an election (whether or not a writ has been issued for the election) by any means”.
This could mean that any public discussions today regarding the reform of charity sectors could constitute political expenditure. For example, advocacy to increase aged care payments, advocacy to adjust the NDIS price guide, or advocacy to change banking hardship policies could potentially be issues before an election. A minor party or independent taking a position in these matters may be enough.
Another hypothetical scenario from the ACNC’s parliamentary submission is as follows: “If a charity were advocating in, for example, January 2018 on the issue of waste and recycling, and an election were called in June 2019 where one of the issues raised was waste and recycling, would the charity be in breach of its obligation to register as a third party or political campaigner?”
The Australian Electoral Commission (AEC) has tried to provide guidance on this issue in its “Financial Disclosure Guide for Third Parties Incurring Political Expenditure”. It notes the following at page 8:
4. There is a distinction between an issue before electors in an election and other public issues. Merely because a person raises an issue in the public domain does not result in that being an issue before electors in an election.
5. In the absence of an actual election being called, to determine whether or not a matter is likely to be before electors involves assessment of how topical the issue is and the difference, if any, between the policy platforms of each party.
6. An assessment is required to ascertain the subjective purposes behind a specific public expression of the relevant issue.
7. The nearer in time the public expression to the possible date for holding an election, the more likely that the views will meet the subjective intention of placing an issue before electors in an election.
This could be a very difficult factual assessment for charities to make.
The threshold for reporting is $10,000 for political expenditure. This is a very low threshold. For peak bodies and larger charities who employ a policy officer to make submissions on Commonwealth laws and policies, this will be very easy to exceed.
Accounting for political expenditure will potentially be challenging where employees have broad roles or where costs are incurred for mixed purposes.
Gifts received for the purpose of political expenditure must also be reported. The present threshold is $13,500.
The first reporting period affected by these changes is 1 July 2017 to 30 June 2018. The report for this period is due on 19 November 2018.
Implications for the sector
The AEC will publish returns in February 2019. As this is potentially the first time many charities will be submitting a return, adverse publicity is foreseeable. In particular, the mass media might seek to criticise charities using money for political expenditure and claim that they should be assisting persons in need instead.
We encourage charities to review the AEC guide and seek professional advice if necessary.
Please contact Jonathan Teh if you would like to discuss this article or wish to seek specific advice regarding your charity’s reporting obligations.
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