The New South Wales Liberal party has backed down in a dispute against the NSW Electoral Commission and will now be eligible for $4.3m in public funding, after it finally revealed the source of donations that it had earlier failed to disclose.

But it will not receive $586,992 of that figure because of that amount in unlawful donations that it accepted during the 2010 and 2011 disclosure period.

In March, the NSW Electoral Commission ruled that several donations breached state electoral laws and refused to pay the Liberals $4.4m in public funding it sought until the party gave details of the donors.

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The Liberal party’s lawyers had earlier flagged that the party would appeal to the supreme court if the commission ruled against it but appeared to have backed down and made the relevant disclosures.

A statement from the NSW Electoral Commission chairman, Keith Mason, released on Thursday said the party had now amended all of its donation disclosures and that it had now complied with their directions. As a result, the public funding withheld from the party could now be released to it.

The decision is likely to relieve some of the financial pressures placed on the Liberal party as a result of the July 2016 federal election. But the party will not receive the $586,992 that the electoral commission considered to be unlawful donations.

Mason said: “On 19 September 2016, the NSW Liberal party submitted an amended declaration, which included disclosure of a number of reportable donations previously undisclosed.”

He said that “officers of the party have taken steps to ensure that the party made full and proper disclosure of political donations for the relevant period”.

But Mason’s statement said the commission did not seek “double recovery”, a process where it could recover twice the funds. Mason said this decision was based on a number of factors, “including difficulties of proof in some instances, likely additional Limitation Act hurdles and the belief that the public interest has been best served by the action taken, its resolution and the importance of being able to provide prompt educative guidance to the public and all political parties”.

Part of the decision to withhold funding was linked to disclosures by the Free Enterprise Foundation. The Free Enterprise Foundation is one of a number of associated entities of the Liberal party that receives political donations from donors, which is in turn passed on the NSW Liberal party. This process meant that the identity of some donors could be concealed.

The commission’s inquiry drew on the Icac investigations that it said found there were “significant breaches” of donation laws, and found that it should have declared a series of donations from the source of those who provided them to the Free Enterprise Foundation. It gave the party an opportunity to amend its declaration in February 2016 but it did not do so.

The findings drew scrutiny from Labor, which had previously raised Arthur Sinodinos’ role as the state party’s finance director and treasurer at the time.

New correspondence released by the commission shows that the Liberal party amended its disclosures on 26 May 2016 surrounding the Free Enterprise Foundation.

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But two remaining donations were in issue until September 2016. Icac had also heard evidence that suggested a donation of $100,000 received from Vincent Heufel was actually donated by Mambare Pty Ltd. It also heard that a donation of $10,000 from Harmony Hill Pty Ltd was actually donated by Jeff McCloy.

A declaration in September 2016 from the new NSW Liberal party agent Bruce Walton, who was not the party agent at the time the donations were made, said that he “accepts that inconsistencies exist between the donations that were made”. But Walton said he “is not in a position to resolve these inconsistencies.”



Mason also provided a separate statement where the commission said it had recovered an “unlawful donation” received by the former MP Andrew Cornwell.

“On 2 August 2016 the NSWEC issued a letter of demand to Dr Andrew Cornwell,” Mason said. “This action was taken on the grounds that Dr Cornwell had accepted an unlawful political donation from a prohibited donor.

“The letter of demand required payment of the AU$10,000 unlawful donation to the state of NSW by 23 August 2016. On 14 September 2016, Dr Andrew Cornwell paid AU$10,000 to the NSWEC in response to its demand without admissions as to the nature of the AU$10,000 donation.”