The decision of the NSW Electoral Commission to withhold public funding to the NSW Liberal Party because of its use of the Free Enterprise Foundation to disguise the identity of donors, including donors banned under NSW law, is rare and welcome.

Australia’s political donations disclosure laws — made up of a patchwork of rules and interpretations across the Commonwealth and states — are a joke. Even when they are blatantly breached, there are few repercussions.

Last year, in the days before his appearance before the Trade Union Royal Commission, Bill Shorten belatedly owned up to payments to his 2007 election campaign (the disclosure was then amended again days later). And the NSW Liberal Party has a long history of amending its disclosures, in some cases years after receiving donations.

But the use of the Free Enterprise Foundation by the NSW Liberals is of another magnitude altogether.

“The Foundation commenced to be used well before 2010 as a means of offering anonymity to favourably disposed donors wishing to support the Liberal Party,” the NSW Electoral Commission concluded. So blatant were the actions of the party and the foundation that one official admitted he had “started to believe that using the Foundation was not within the spirit of the Act”.

As it turns out, it wasn’t within the letter of the act, either. The NSW Liberals face a serious financial penalty for failing to adhere to the law relating to donations disclosure.

However, it is only when party officials face real consequences for such failures that we can start to be confident about the political donation disclosure system. The first casualty should be Senator Arthur Sinodinos — then-NSW Liberal Party finance director and treasurer. Sinodinos should resign from Parliament over the party’s misuse of the Free Enterprise Foundation.