High Court rules parts of Victoria’s political donation laws unconstitutional ahead of state election

Just seven months out from the state election, Victoria’s parliament is scrambling to draft new political donation laws after the High Court ruled its existing caps unconstitutional.

Lawyers for independent candidates Paul Hopper and Melissa Lowe successfully argued that the major parties gained an unfair advantage by exploiting a “nominated entities” loophole.

“All Australian voters want is a level playing field,” said Paul Hopper.

“Thanks to this verdict, the days of major parties rigging elections to serve themselves are over.”

Nominated entities are organisations linked to a political party that manage their finances and assets.

Under Victoria’s laws, the entities weren’t subject to the cap of $4,970 per donor.

This allowed those entities to give uncapped amounts to the major parties, effectively providing those parties an uncapped source of funding.

“The High Court has confirmed what Australia Institute research has shown for years: Victoria’s donation cap, with its many loopholes, is undemocratic,” said Bill Browne, Director of the Australia Institute’s Democracy & Accountability Program.

“Victorians were told donation caps would level the playing field, but they have done the opposite – concentrating financial power in the hands of politicians and their staff, party subsidiaries and corporations.”

The Financial Review reported that Chief Justice Stephen Gageler and Justices Michelle Gordon, Jayne Jagot and Robert Beech-Jones found there was “no dispute” that only three parties – the major parties – benefited from the nominated entity exception.

“It’s a great day for democracy and goes a long way to enshrining a level playing field in our elections and a chink in the armour of the two major parties’ duopoly,” said Melissa Lowe.

“It has implications for the fairness of electoral laws around the country.”

The remarkable decision means there are now no limits on donations or disclosure requirements unless Parliament passes new legislation before the November election.

“The High Court’s decision gives the Victorian Parliament a chance to go back to the drawing board, consult with voters and design a fair political finance system – one where taxpayer funding supports new entrants and challengers as well as major parties and incumbents,” said Mr Browne.

He argued the flaws extended beyond the specific loophole identified by the court, describing the broader system as skewed in favour of established parties.

“The whole political finance system was implemented in an unfair and undemocratic way, so that major party spending was barely affected but minor parties and independents face an uphill battle,” he said.

Rather than targeting specific donation cap provisions, the court went further, striking out an entire section of Victoria’s Electoral Act that also dealt with foreign donation bans and disclosure requirements.

Victoria’s Premier Jacinta Allan said it left politics exposed to “dark money from foreign billionaires”.

The ruling is likely to have broader implications, with both the Albanese Labor government federally and the Malinauskas Labor government in South Australia having introduced donation restrictions with a nominated entities loophole.

“The case puts the federal and South Australian governments on notice, since they have also combined donation restrictions with a nominated entity loophole for major parties. If these laws are not amended to make them fairer, they risk being struck down as well,” Mr Browne said.

The Australia Institute has long advocated for political finance reform to restore integrity and reduce the influence of vested interests.

It has proposed a “mega-donor cap” that still allows for private fundraising but limits the total financial influence that any one donor can have.