The Albanese government had proposed an annual $20,000 individual donation limit to a party's state or federal branch and lowering the threshold at which donations are publicly declared to $1000.
While a deal with the coalition was close, negotiations broke down on Wednesday night, scuppering any hope of the laws passing before Christmas.
It's understood the coalition is pushing to increase the individual donation limit to $40,000 and the reporting threshold to $5000.
Labor wants to ease how the caps affect the war chests that advocacy and peak bodies build from member fees.
But the Liberals are holding out due to changes making it easier for trade union councils and civil society peak bodies to run campaigns.
Labor's Don Farrell had hoped the Senate would pass the donations laws on Thursday. (Lukas Coch/AAP PHOTOS)
Special Minister of State Don Farrell, who is spearheading the federal government's electoral legislation, was hoping to have the laws ticked off on Thursday with bipartisan support.
Negotiations will continue over the summer until parliament resumes in February.
Finance Minister Katy Gallagher is pushing to have the reforms passed by the federal election, which is due by late May.
The changes will not come into effect until mid-2026, but Labor argues they need to be passed as soon as possible to give parties and the Australian Electoral Commission time to adapt to the laws.
A $90 million federal spending cap for political parties and $11 million limit for special interest groups such as unions and fundraising group Climate 200 have been opposed by those arguing donations should not be capped as it goes against free-speech principles.
An $800,000 candidate spending cap for each electorate will also be imposed on candidates under the proposed changes.
Clive Palmer's election spending was a catalyst for Labor's proposed reforms. (James Ross/AAP PHOTOS)
Billionaire Clive Palmer has flagged a High Court challenge.
Mr Palmer's $120 million spend at the 2022 election to have a single senator elected was a catalyst for the reforms.
Millionaires spending an unchecked amount of money at elections was "subverting our democratic process", Opposition Leader Peter Dutton said.
But the bill in its current form was not something the opposition could support, Mr Dutton said on Thursday, without elaborating on which aspects.
Crossbenchers have argued that how the changes are structured and a proposed increase in public money that goes to parties per vote stacks the odds against them.
An overarching federal war chest parties can use to target key seats with broad advertising not captured in the $800,000 cap could also handicap independents and grassroots movements, they argue.
Indepentent Kylea Tink wants the reforms package to be split, but Labor has ruled that out. (Bianca De Marchi/AAP PHOTOS)
Independent MP Kylea Tink called for the government to split their reforms and pass broadly supportive sections including lowering the donation disclosure threshold and having real-time reporting requirements.
Labor has ruled out splitting the package.
Parties being able to move cash around to sandbag at-risk seats on top of candidate expenditure while independents and minor parties only had $800,000 was "a crass attempt" to lock out competition, she said.
30°C