As the UK government debates whether to cap political donations it is worth looking to Australia, which has spent more than a decade trying, and often failing, to do the same. Recently, the country’s highest court struck down the state of Victoria’s donation caps for containing a loophole that advantaged the major parties – taking the entire political finance regime down with it. The lesson to draw is not that caps are doomed to fail, but that the intent behind their design will determine their legality, legitimacy and legacy. 

Australia’s experiments with donation caps

The idea of capping how much an individual can donate has received growing interest in the UK against concerns that political parties are increasingly beholden to a small group of ultra wealthy donors. Australian politics is no exception. Ahead of the 2022 Australian federal election, the mining billionaire Clive Palmer poured a record AU$117 million (approximately £60 million) into his ‘United Australia Party’ – more than any Australian political party had ever received in a single year. 

This unprecedented ‘donation concentration’ triggered cross-party support on federal campaign finance reform. In February 2025, the Australian Parliament passed the Electoral Legislation Amendment (Electoral Reform) Act 2025 (Cth) – the biggest update to Australian electoral law in 40 years. Amongst a range of initiatives, including campaign spending limits and reduced donation disclosure thresholds, the Act introduced an annual cap on donations of AU$50,000 per donor (approximately £26,000).

But this was not Australia’s first donations cap. As a federation, Australia’s states and territories legislate independently from the federal government, and several states had already implemented their own experiments. New South Wales (NSW) introduced caps on all political donations in 2011, alongside campaign finance limits and other measures. Despite initial flaws, the NSW regime has been forged into a robust framework through the fire of four High Court challenges over the past 15 years. 

Perhaps the most significant was the case brought in 2015 by Jeff McCloy, who argued that unlimited political donations should be protected as a form of political participation because they enabled businesses to gain access to politicians, acquire influence and advance their interests. The court labelled this argument ‘as perceptive as it is brazen’, commenting that ‘guaranteeing the ability of a few to make large political donations in order to secure access to those in power would seem to be antithetical to the great underlying principle’ of representative government.  

South Australia has adopted an even more ambitious experiment. Laws banning donations to all political parties and candidates (other than new entrants) came into force on 1 July 2025. Instead, private money was replaced by public funding. In explaining the rationale behind the regime, Premier Peter Malinauskas said that an increasing donations arms race meant that fundraising was becoming a politician’s main occupation. Malinauskas argued that the new laws were designed to prevent a future where “the likelihood of a politician’s election depends upon money, rather than the power of their ideas”. 

What went wrong in Victoria?

In 2018, Victoria introduced a political finance regime that included a cap on donations. But it also created a loophole that allowed unlimited donations from ‘nominated entities’ – organisations appointed to operate for the benefit of the political party. Under the law, only the three major Australian political parties – Labor, Liberal and the Nationals – were able to establish nominated entities, leaving new political parties and independents unable to access an equivalent source of funding.

In April 2026, a unanimous High Court found that Victoria’s donations cap was unconstitutional because the nominated entities scheme was not compatible with the legitimate purpose of preventing corruption in government decision making. The court went further than expected, finding that they could not sever the nominated entities provision from the political finance regime and striking down the entirety of Part 12 of the Victorian Electoral Act. As a result – seven months before an election – Victoria was left without political finance laws.

Unsurprisingly, the Victorian government moved fast to fill the vacuum and, in June 2026, new legislation was passed that abolished the nominated entities loophole and restored disclosure limits, the ban on foreign donations and public funding. It also gave new political parties and independent candidates a higher initial donations cap to help them become established. 

However, critics argue that the new regime has simply relocated, not removed, many financial advantages for the major parties. For example, it does not limit campaign spending and it has increased public funding for administrative costs to roughly ten times the rate under the federal system, handing the major parties millions of tax-payer dollars that are not available to new parties and independents. Australian legal scholars have already foreshadowed that this new legislation may face similar constitutional problems as its predecessor. 

The federal donations cap, due to come into force on 1 January 2027, is facing its own High Court challenge. As well as containing a nominated entity provision, the federal scheme creates another loophole – the AU$50,000 donations cap applies to each registered party branch. As the major political parties have branches in each of Australia’s six states and two territories, as well as a federal branch, this means they could accept AU$450,000 per donor on annual basis. Independents or smaller parties do not have the infrastructure to register separate branches and therefore do not have the same advantage. 

The South Australian caps are yet to be challenged in court. However, the legislation was drafted on the assumption that it would face judicial scrutiny, with the South Australian government taking advice from a range of experts on how to level the political funding playing field for all participants. Perhaps is it because of this stress-testing that, although the regime also includes a nominated entity provision, those funds can only be used for administrative expenditure, not campaign spending. Australian legal academics have speculated this may save it from a constitutional challenge. 

Lessons from the Australian experience

Australia’s experiments with donation caps show that while they are complex to get right, they are worth the effort. They can clean up politics by reducing the influence of large donors and make political competition fairer. However, they are not a silver bullet to be implemented in isolation. Capping donations must be combined with limits on campaign expenditure, timely disclosure requirements, proportionate rules for third-party campaigners, and penalties with genuine teeth. Otherwise, the money that once flowed into political party coffers is simply diverted elsewhere, with the same distorting effect. 

The more important lesson to draw from the Australian experience is that intent will out. As eminent Australian constitutional scholar Anne Twomey observed about the federal and Victorian donation caps, ‘in both cases, major parties tried to manipulate the electoral funding laws to their advantage’. Political finance reform that claims to fight corruption while giving preferential treatment to established parties or disadvantaging new entrants risks more than a legal challenge. It deepens the very cynicism it was meant to cure by confirming the public’s suspicion that the rules are written by insiders, for insiders. 

The application to the UK context is uncomfortable but unavoidable. The UK government’s proposal to cap overseas-based donors, while leaving domestic donations unlimited, is precisely the sort of self-interested half-measure that fails to deliver the protections it promises and could forfeit the public trust it is intended to build. And the loss of public trust in democracy is a price no political party can afford to pay.

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