Victoria left without limits on political donations after high court rules laws unconstitutional

The high court has ruled Victoria’s political donation laws are unconstitutional, leaving the state with no limits on donations and no disclosure requirements unless new legislation is urgently introduced before the November election.

The unanimous decision, handed down by Australia’s highest court on Wednesday, struck out an entire section of Victoria’s electoral act that introduced caps on political donations but carved out an exemption for major parties.

The ruling is likely to have major implications ahead of the November state election, as well as for similar campaign finance laws introduced by the South Australian and federal governments.

Victoria’s laws, which were introduced in 2018 and came into effect ahead of the 2022 election, capped campaign donations at $4,970 per individual per term but provided an exemption for funds transferred to registered political parties through their “nominated entities”.

The only parties with nominated entities registered with the Victorian Electoral Commission are Labor, and the Liberal and National parties. While laws allowed for the creation of new nominated entities, any set up after 1 July 2020 were subject to the donation cap.

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The case was brought by Paul Hopper and Melissa Lowe, two independent candidates who contested the 2022 state election and plan to stand again in November. Hopper will run with the new West Party, which intends to field candidates in seats in Melbourne’s west.

Their counsel, Ron Merkle SC, had told a hearing in February that the nominated entity exemption should be scrapped as it was “solely enacted for the benefit of the three legacy parties”.

But the high court went further in its ruling, declaring the entire part 12 of the Electoral Act was invalid as it “impermissibly burdens” the constitution’s implied freedom of political communication.

Hopper told reporters on Wednesday he was not shocked the high court went further than they had asked, describing the laws as a “mess”.

Paul Hopper (left) and Melissa Lowe in front of Victorian Parliament House. Photograph: Joel Carrett/AAP

“What they’ve done is send a clear message to the government of Victoria that things have to be fair and there has to be a level playing field,” he said.

Lowe said that if the government had scrapped the nominated entity exception as they had requested in a letter sent in 2024, the case would never have made it to the high court.

“They clung to it for two years because they wanted to protect their own incumbency and we’ve deeply challenged that,” she said.

“Yes, there’s work that needs to be done but the state government probably should have done that work in the first place.”

Both the opposition and the Greens raised concerns the ruling effectively removes all safeguards ahead of the election.

The shadow attorney general, James Newbury, said: “This is a very big problem for the integrity of our electoral system. We now have effectively no donation system, no caps and no limits on foreign donations.”

“Clearly that would be a concern to Victorians and we in good faith would work with the government right now on helping to make sure that’s fixed.”

The Greens leader, Ellen Sandell, also urged the government to take immediate action to cap donations to prevent a US-style system “where billionaires and big corporations can buy politicians and elections”.

“If Labor doesn’t take immediate action to cap donations to political parties, they’re giving big corporate interests and billionaires free rein to influence this year’s state election,” she said.

A Victorian government spokesperson described the decision as disappointing.

“This is a win for billionaires and a loss for transparency,” they said. “We are considering our options.”

It’s understood the government is preparing to introduce new legislation to parliament but this will not occur prior to a by-election in Nepean on 2 May, leaving the final weeks of the campaign a funding free-for-all.

The federal government is facing a challenge to its campaign finance laws on similar grounds by former independent MPs Zoe Daniel and Rex Patrick.

The Centre for Public Integrity executive director, Catherine Williams, said the Victorian decision sent a clear warning to governments across Australia.

“Today’s judgment makes it clear: governments cannot rig electoral laws in favour of major parties and expect to get away with it,” she said, adding that Victoria must now pursue “genuine reform – not cosmetic change”.

This was echoed by Bill Browne from the Australia Institute, who said the decision gave the state government a “chance to go back to the drawing board” to design a fairer system.

He said it also put the federal and South Australian governments “on notice”.

“If these laws are not amended to make them fairer, they risk being struck down as well,” Browne said.