Advocacy and campaigning activities are fundamental to the role of many charities and the social sector more broadly in a democratic society, particularly during the time of an election. By raising awareness, encouraging public debate, assisting in the development of public policy and promoting or opposing laws, policies, practices or governmental decisions, charities and not-for-profits (NFPs) can advocate on issues or campaign for change.
Previously in this election series, we examined the political activities that charities are and are not permitted to undertake, and the charitable purpose of ‘advancing public debate’.
But that’s not all! …
Another important piece of the puzzle is how the requirements of the Commonwealth Electoral Act 1918 (Electoral Act) relate to charities and NFP organisations.
This article explores the relevance of electoral activity and expenditure for charities and NFP organisations and the relevant reporting obligations. We appreciate this topic can be a bit confusing, and we have done our best to make things a little bit clearer.
Specific requirements applicable to political entities, associated entities, members of the House of Representatives and Senators fall outside the scope of this article, however relevant information can be found on the Australian Electoral Commission (AEC) website. Additionally, charities and NFPs engaged in local government, state or territory based elections should also be mindful of further regulations and reporting regimes flowing from the relevant state or territory electoral commission.
Can charities and NFPs spend money on advocacy and campaigning activities?
Charities may conduct certain advocacy and campaigning activities (including during an election cycle) without jeopardising their charity registration with the Australian Charities and Not-for-profits Commission (ACNC). We covered this issue in detail in our article Let’s get political: when can charities partake in advocacy and campaigning activity?.
However, if these activities are undertaken in connection with an election, all electoral laws, including disclosure requirements, must be complied with. Charities undertaking advocacy and campaigning activities, and which incur expenditure when doing so, must therefore be aware of and consider their electoral reporting obligations in addition to whether these activities may amount to a political purpose (which would jeopardise their charity status with the ACNC).
NFP organisations that are not registered as charities with the ACNC will still be subject to the requirements of the Electoral Act but are not restricted by the same legislative requirements as charities in relation to a disqualifying purpose. Non-charitable NFPs will therefore need to determine whether reporting obligations have arisen. NFPs should also be mindful of public perception with regard to their activities, especially in the lead up to an election, and should consider any potential consequences of the advocacy and campaigning activities on their reputation.
What are the reporting obligations under law?
The Electoral Act regulates, among many other things, whether entities need to disclose expenditure on advocacy, campaigning, lobbying and awareness raising and, if so, how. This can sometimes still be the case even where these activities are being undertaken to make a positive change in society and further the purposes of the charity or NFP.
In a nutshell, if an organisation is spending money on trying to influence the way people vote in a federal election, even if in the furtherance of a charitable purpose and even if in a manner acceptable to the ACNC, this expenditure nevertheless needs to be disclosed on a public register.
In slightly more complicated language, under the Electoral Act, where an individual or organisation (who is not a political entity or politician) incurs federal electoral expenditure of more than the disclosure threshold (discussed below), it must disclose details to the AEC where donations are used to:
- incur the electoral expenditure;
- create or communicate electoral matter; or
- reimburse the organisation for one of these activities.
This information is then published on the AEC’s Transparency Register. Since 30 July 2021, links to the information published on the Transparency Register are also included on the ACNC’s Charity Register for registered charities.
What are the disclosure thresholds?
“Third parties” are defined as those that incur more electoral expenditure than the disclosure threshold but less than $250,000 within a financial year. The disclosure threshold for 1 July 2021 to 30 June 2022 is $14,500.
The Electoral Act requires third parties to provide the AEC with a Third Party Return for the financial year no later than 20 weeks after the end of the financial year. The Third Party Return must include:
- the total electoral expenditure incurred above the disclosure threshold;
- details of gifts received for electoral expenditure of more than the disclosure threshold wholly or partly used to incur the electoral expenditure disclosed in the return; and
- a signed statement of compliance with the foreign donation restrictions.
Third parties are not required to register with the AEC but will be automatically included on the Transparency Register if they lodge an annual return for the current, or any of the three previous financial years. Third parties will remain on the Transparency Register for three years following a financial year in which they report.
Further information about third party reporting to the AEC can be found in the Financial Disclosure Guide for Third Parties Incurring Electoral Expenditure, published for the 2020/2021 financial year.
Significant third parties
An entity will be required to register as a “significant third party” where:
- electoral expenditure exceeds $250,000 in the current financial year or in any one of the previous three financial years;
- electoral expenditure is at least equal to the disclosure threshold during that financial year and electoral expenditure during the previous financial year was at least one‑third of the revenue of the person or entity for that year; or
- during that financial year the person or entity operates for the dominant purpose of fundraising amounts:
- the aggregate of which is at least equal to the disclosure threshold; and
- that are for the purpose of incurring electoral expenditure or are to be gifted to another person or entity for the purpose of incurring electoral expenditure.
The classification as a significant third party was introduced through the Electoral Legislation Amendment (Political Campaigners) Act 2021 (Cth) (Political Campaigners Act) in December 2021 and applies retrospectively. Entities that meet the above criteria were required to register as a significant third party by 14 March 2022 to be included on the transparency register and must appoint a financial controller at the time of registration. As this classification replaces the previous category of ‘political campaigner’, individuals or organisations currently registered as a political campaigner will not need to re-register as a significant third party.
A significant third party is required to lodge a Significant Third Party Return on an annual basis. The annual return must include:
- the total value of receipts;
- details of amounts received that are more than the disclosure threshold;
- the total value of payments;
- the total value of debts as at 30 June;
- details of debts outstanding as at 30 June that total more than the disclosure threshold;
- total value of electoral expenditure; and
- details of any discretionary benefits received from the Commonwealth, state or territory.
An entity that registers as a significant third party in the current financial year that was not required to be registered in the previous financial year, must lodge an annual return for the previous financial year within 30 days of having registered.
The new thresholds and requirements have been set out as follows:
Electoral expenditure in 2021/2022 financial year
Less than or equal to $14,500
Between $14,501 and $250,000
Significant Third Party
More than $250,000
So, what is electoral expenditure?
The definition of electoral expenditure depends on whether the entity is considered a third party or a significant third party.
For entities considered a third party, electoral expenditure includes spending for the dominant purpose of creating and/or communicating electoral matter.
Electoral matter is defined in the Electoral Act as matter communicated or intended to be communicated for the dominant purpose of influencing the way electors vote in a federal election of a member of the House of Representatives or of Senators for a State or Territory. In other words, this means influencing the order in which a voter indicates their preferences on the ballot paper and includes influencing a voter’s choice of whether to cast a formal ballot. Unless the contrary is proven, the dominant purpose of a communication is presumed to be electoral matter if the matter expressly promotes or opposes:
- a political entity, to the extent that the matter relates to a federal election; or
- a member of the House of Representatives or a Senator, to the extent that the matter relates to a federal election.
Therefore, even where other purposes exist, for the spending to be considered electoral expenditure, the main purpose must be to influence the way in which electors vote.
Examples of electoral expenditure include spending on:
- advertisements in newspapers, radio, television, the Internet, social media, posters, billboards, brochures, how-to-vote cards and other publications;
- the production and distribution of electoral matter, including printing, research, such as focus groups and video production; and
- employment of staff engaged in election campaigning or producing electoral material.
In determining whether the dominant purpose of the matter is to influence the way in which people vote, the AEC notes that consideration will be given to:
- where the matter is communicated (will it be communicated publicly or to a section of the public? will it be received by electors near a polling place?);
- how soon a federal election is to be held after the creation or communication of the matter;
- the source of the matter (is it communicated publicly by a political entity or significant third party?);
- the content of the communication (does it contain express or explicit comment on a political entity, a member of the House of Representatives or a Senator?);
- the audience (is the intended audience electors?); and
- whether the audience has consented to receive such matter (is the communication unsolicited?).
As outlined in the AEC’s Electoral Matter and Electoral Expenditure factsheet (Factsheet), where matter is accessible to the public or a large section of the public, communicated by a significant third party to electors and where the electors did not request or invite the communication, it is more likely to be considered electoral matter.
Communications with the dominant purpose of educating their audience, raising awareness of, or encouraging debate on a public policy issue, are not considered electoral matter and any money spent on such communications would not be considered electoral expenditure.
Content also not considered electoral matter, and therefore unlikely to incur electoral expenditure includes:
- content forming part of the reporting of news, the presenting of current affairs or any genuine editorial content in news media; or
- content created for a satirical, academic, educational or artistic purpose; or
- private communications between two individuals known to each other, or to a political entity in relation to public policy or administration.
Under the Electoral Act, each creation, recreation, communication or recommunication of matter is to be treated separately for the purposes of determining whether matter is electoral matter. Therefore whilst matter may have been exempt when originally created, it may be considered electoral matter if recommunicated for the dominant purpose of influencing votes in a federal election.
For example, an environmental organisation may collate and publish information on, analysing, or comparing party policies as they relate to the organisation’s position on climate change and renewable energy. The dominant (and initial) purpose of such a publication may be raising awareness and encouraging debate of a public policy issue. However, if that organisation were to redistribute the publication, outside a polling place on the day of a federal election, the dominant purpose of the subsequent communication could amount to influencing the way electors vote and the expenditure spent on reproducing the material may be reportable.
The AEC’s Factsheet also provides the following examples:
Example 1: Kerrie is the Chief Executive Officer of a not-for-profit organisation that encourages healthy eating. The organisation occasionally issues material to influence how electors vote, but Kerrie’s primary role involves organising the delivery of healthy eating programs in schools and workplaces. As the dominant purpose of employing Kerrie is not for her to create or communicate electoral matter, her salary is not electoral expenditure.
Example 2: A community group decides to support a candidate who is running for election against a sitting member of parliament. The group contracts a temporary employment agency to provide 80 people to doorknock in the member’s electorate. The script the temporary employees are given to assist them in talking to residents has a dominant purpose that makes it electoral matter, even though it contains some content relevant to the usual business of the community group. As the community group’s dominant purpose in signing the contract to engage the temporary staff is to communicate electoral matter, the money the agency charges the community group is electoral expenditure incurred by the group.
There are strict authorisation requirements relating to electoral matter, even where no expenditure has been incurred or where the expenditure incurred does not need to be disclosed as set out below. Electoral matter can be authorised by including the name and location of the person who approved of the communication, usually at the end of the communication. For more information on authorisation, see the AEC Electoral Backgrounder: Electoral communications and authorisation requirements.
Significant third parties
In December 2021 the Electoral Legislation Amendment (Political Campaigners) Act 2021 (Cth) (the Political Campaigners Act), expanded the definition of electoral expenditure for significant third parties to include any expenditure incurred “in relation to an election”. Electoral expenditure for significant third parties requires a direct link between the spending and the election and carries a broader and more vague definition than electoral expenditure for third parties.
This means third parties that incur electoral expenditure of more than $250,000 will automatically be considered significant third parties and will be subject to the expanded definition of “electoral expenditure”. Practically, the electoral expenditure for these entities would likely exceed that which was calculated for the entity as a third party as they will be required to recalculate electoral expenditure based on any expenditure incurred “in relation to an election”.
Reflecting on the list of factors considered by the AEC to be influencing the way in which people vote, the AEC notes consideration will be given to the source of the matter and whether it is communicated publicly by a significant third party. This indicates that any communications released by a significant third party “in relation to an election” could be considered electoral material, meaning the money spent on it would be electoral expenditure.
As this new category has recently come into effect, the AEC is yet to provide specific examples of what may be captured by this new broader definition of “electoral expenditure”.
Need legal advice?
For further information on political activities, please see our article, Let’s get political: when can charities partake in advocacy and campaigning activity?
As this is a complicated area, if you require additional information or advice, please get in touch with our specialist Charities + Social Sector lawyers.