Nominated entities are parties' asset holders and fundraising arms, and they are not subject to the same donation cap of around $5,000 that applies to Victorian citizens and other donors.
With the Victorian election due in November, the parliament only has a narrow window to fix the state's unfair, undemocratic and unconstitutional laws.
But there are also implications for South Australia and federally, where Labor governments have also rushed through donation caps with a "nominated entities" loophole.
Key points:
- The High Court has found that Victoria's strict cap on political donations combined with its carve-out for "nominated entities" (party asset holders and fundraising arms) is invalid because it "impermissibly burdens" the implied freedom of political communication.
- Under Victoria's laws, donations from the Victorian public are very restricted, but union fees, corporate memberships, levies on MPs and their staff and donations from political candidates are not.
- The Australia Institute has outlined principles for fair political finance reform that should guide any changes to election laws.
- The case has implications for federal and South Australian political donation laws, because both jurisdictions include nominated entity loopholes as Victoria did.
- A mega-donor cap and democracy vouchers would be more democratic ways of limiting donations and distributing taxpayer funding, while respecting freedom of political communication.
"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 problems go far deeper than just the 'nominated entity' loophole that the High Court has ruled is unconstitutional.
"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.
"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.
"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."
