Coalition declares Labor's changes to Vic election laws 'unconstitutional'

Jacinta Allan says the changes will help new candidates "get a foothold". (AAP: Joel Carrett)

A cap on political donations will be raised and foreign donations will be banned under proposed changes to Victoria's electoral act.

Funding Labor receives from trade unions would remain uncapped, enraging the opposition, however this cannot be used in political campaigns.

Independent candidates who had the donation rules thrown out say they will return to the High Court if they believe the laws provide an unfair advantage to incumbents.

The cap on political donations in Victoria will increase and will be twice as large for new candidates after the High Court struck out part of the state's electoral act.

Premier Jacinta Allan today announced that donations would be capped at $7,500 over every four-year term.

But new candidates would be able to fundraise up to $15,000 over the same period from each donor to "get a foothold", Ms Allan said.

Cash Labor receives from trade unions as associated entities would remain uncapped, enraging the opposition, however this cannot be used in political campaigns.

The state government has in-principle support from the crossbench to pass the legislation through the upper house. (ABC News: Danielle Bonica)

"Victoria's elections should be decided by Victorians — not who has the deepest pockets," Ms Allan said in a statement.

"Public funding is core to free and fair elections. We're restoring it."

But Shadow Attorney General James Newbury said the government was "rigging the system" and would provide yet more public money for the Labor Party in the middle of a cost-of-living crisis.

"The government, at no point, has shown any interest in fixing the constitutional concerns with this bill."

James Newbury says Labor's proposed laws are unconstitutional. (AAP: James Ross)

Victoria had no rules governing donations six months out from the state election after the High Court in April found the previous laws were unconstitutional.

Independent candidates Paul Hopper and Melissa Lowe, who contested the 2022 state election, successfully argued that the laws benefited the major parties by giving them unfettered access to their legacy cash in what is known as "nominated entities".

Mr Hopper and Ms Lowe have declared their willingness to return to the High Court if they believe the fix still gives incumbents an unfair advantage.

Under the proposed laws, the Labor, Liberal and National parties will need to refund any cash provided by their nominated entities that was not already spent by April 15, when the High Court judgement was