Donors will only be able to give up to $20,000 in a calender year, indexed, and candidates will be limited to spending $800,000 in an electorate under proposed legislation to come before parliament on Monday.
Senators will only be able to spend $200,000 per seat in the state, equating to a $9.2 million cap for NSW and $600,000 for the ACT.
The reforms won't come into effect before the next federal election, due by late May, but would be in place from July 1, 2025.
Clive Palmer spent more than $120 million in 2022 to get one United Australia Party senator elected. (Joel Carrett/AAP PHOTOS)
Unions and special interest groups such as Climate 200 will be subject to the laws, which have in-principle support from the coalition.
There will be an $11 million spending cap for a federal campaign for organisations not running at the election, such as unions and lobby groups.
The federal cap for registered parties will be $90 million.
Under the legislation, there will be more transparency about donations, with the disclosure threshold lowered to $1000 - indexed every three years - on top of real-time monthly reporting requirements.
This would increase to every week during an election campaign and every day in the week before and after polling day.
The amount the Australian Electoral Commission pays candidates per vote would increase from $3.50 to $5.
Senator Murray Watt believes all Australians want to keep big money out of politics. (Darren England/AAP PHOTOS)
Employment Minister Murray Watt said Australia shouldn't "go down the American path where we can see rich individuals effectively buy elections".
"We are seeing an increasing arms race when it gets to political donations and the amount of money that's been spent on election campaigns," he told ABC TV on Friday.
"I think all Australians have an interest in trying to keep big money out of politics."
It would mean everyone's vote counted "rather than just the richest people in our communities", Senator Watt said.
He denied it was a deal between the two major parties to kneecap independents.
"People should be able to win elections on the basis of their policies, their campaigning, rather than the fact that they prepared to spend inordinate amounts of money and take massive donations," Senator Watt said.
While the transparency part is long overdue, replacing political donors with taxpayer $ locks in the 2 party system. The ALP and LIB 'electoral reform' deal needs proper scrutiny- rushing it through threatens future political competition. — Kate Chaney (@ChaneyforCurtin) #auspol #electoralreform pic.twitter.com/knIgndJIFUNovember 14, 2024
Independent MPs Zali Steggall and Kate Chaney criticised the legislation for shutting out competition and giving more public funding to major parties.
The major parties struck the deal because they were worried about the prospect of a larger cross bench, Ms Chaney said after a record number of independents were elected in 2022.
Independent senator David Pocock agreed big money shouldn't buy elections, but said changes needed to provide a level playing field and the balance to protect independents hadn't been struck.
He chastised the government for reportedly seeking to rush through the legislation without a parliamentary inquiry, saying it was "damaging to our democracy" and the cross bench hadn't been consulted in months.
Billionaire Clive Palmer spent tens of millions of dollars in 2019 to keep then-opposition leader Bill Shorten out of office, before splashing more than $120 million in 2022 to get a single United Australia Party senator elected.
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