South Australia’s leap into the unknown with political finance changes
July 1 marked a dramatic change in how political parties and candidates are funded in South Australia, writes Bill Browne.
The laws – which were rushed through late last year – came into effect from the new financial year, ahead of the next state election on March 21, 2026.
The laws go further than any other state in Australia in banning political donations and replacing them with taxpayer funding of parties and candidates.
However, the same pattern appears in other states and in recent changes to federal election laws – the new taxpayer funding is not fairly distributed between parties and candidates, and restrictions fall more heavily on new entrants and independents while loopholes ensure major parties can still operate comfortably.
New entrants are strictly restricted in the donations they can receive – but are not eligible for the same taxpayer funding that existing players will be.
In South Australia, minor parties and independents will struggle while incumbent political parties run multimillion-dollar campaigns with public money.
The 2026 state election should provide more data on how incumbents and challengers alike respond to large-scale taxpayer funding of elections.
Independents and new parties considering national politics will watch with interest, since a Labor/Liberal deal means that the next federal election will also feature party campaigns funded by the taxpayer and restrictions on fundraising that fall more heavily on new entrants.
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In South Australia, sitting MPs and registered political parties are now banned from receiving political donations. However, the laws include loopholes: Political parties can still charge their own MPs and staff levies (worth millions of dollars) and still take money from “nominated entities”, such as an established investment vehicle.
Of course, the small political parties and independent candidates who compete with major parties do not have many or any MPs to extract levies from, and have no investment vehicles that could operate outside the donation ban.
In exchange for limiting political donations, South Australians will pay about $18 million more in taxpayer funding of political parties and candidates every four-year cycle. Of this, the Australia Institute estimates about 75 per cent will go to the major parties and only 1-2 per cent to new entrants.
This goes against the government’s own expert panel, which recommended lower rates of public funding for major parties and more for new parties and candidates. Overall, public funding for political parties will be about 66 times higher than it was 10 years ago.
The additional cost to the South Australian public far exceeds the private donations that the ban is supposedly replacing. Between 2022 and 2026, Labor, the Liberals and the Greens received about $2.7 million in “large” donations (exceeding $5000). These donations pose the greatest risk of compromising government decision-making.
The bill increases public funding by about $18 million, or about $15 million more than would have been needed to replace large political donations.
Candidates will be strictly limited in how much they can spend. But lobby groups can spend up to $450,000 per election campaign. Of the 17 third-party campaigns in the past two South Australian elections, 16 spent less than $450,000. In other words, the changes will do little to stop vested interest campaigns, even as they dramatically limit fundraising by new candidates.
The South Australian parliament waved these drastic changes through without the scrutiny and debate expected of major reforms.
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This could be understandable, if unwise, had the politicians understood and supported the government’s changes.
But listen to their own words as they described the laws: “rushed”, “a bit of a leap of faith”, an “election vanity project”, “Hobson’s choice”, “uncharted waters” and “fraught with anomalies”.
One parliamentarian compared it to Sophie’s Choice, the movie where a mother is forced to choose which of her children will be murdered by the Nazis.
Sophie’s Choice runs for 2½ hours, about as long as the Legislative Council spent scrutinising these laws, the biggest changes to any Australian democracy in living memory.
As is often the case with rushed and secretive laws, they have already backfired.
They included an accommodation for the Greens. In the new public funding provisions, a second MP is worth almost twice as much as a party’s first MP. It means a party with exactly two MPs gets a funding boost – to $490,000 a year, close to the annual cost of running the SA Greens ($547,000).
Unfortunately for the Greens, their second MP has since defected. The party will have the same costs, but with about a third of the funding it was expecting.
The Australia Institute warned that this kind of thing could happen: “The fact that a per-MP funding model breaks when you get to the third largest political party in South Australia is evidence that the per-MP funding model is fundamentally flawed and illogical.”
The broken per-MP funding model and the “nominated entities” loophole appear outside of South Australia as well, including in federal laws passed earlier this year.
South Australians are entitled to ask questions of the Malinauskas Labor government that drove these changes, and of the Liberals, Greens and independents who let them sail through. Tens of millions of dollars of public money will go to political parties and candidates without scrutiny, while entrants to South Australian politics face an uphill battle and most lobby groups are free to spend as they ever have.
If new entrants cannot fairly compete with well-funded incumbents and if lobby group campaigns remain as large as they ever have been, the South Australian election will also serve as an early warning on the federal laws.
Bill Browne is director of the Australia Institute’s democracy and accountability program
