Scott Morrison has rejected claims his former attorney-general Christian Porter's secret donations were not being looked into after his government quashed efforts to have the matter scrutinised.
Mr Porter, who resigned from the front bench last month, had updated his parliamentary register of pecuniary interests with a trust established to pay his private legal bills over defamation claims against the ABC but refused to name the donors.
The government instead has sought for the privileges committee to look into the broader issue of politicians crowdfunding legal cases and to establish clear rules.
"The suggestion that somehow things are not being looked into, that things have not been referred to, is not the case," the Prime Minister told Parliament on Thursday.
There were implications for both sides of politics the committee should consider, he said.
That referral, made by the government's leader of the house Peter Dutton, did not mention Mr Porter.
Crossbench MPs and Labor slammed the government voting as a bloc to overturn Mr Smith's recommendation.
In Question Time Labor MPs sought to understand if the government's proposed Commonwealth integrity commission would have the power to investigate Mr Porter's secret donation.
The Prime Minister replied the government's commission model would have the power to examine serious criminally corrupt conduct.
Several independent MPs were unable to participate in the vote as the government has refused their bid to arrange reciprocal "pairs" ensuring votes reflects the will of elected members who cannot attend for health or other reasons.
Indi MP Helen Haines said Mr Porter could have been referred if the government had allowed crossbenchers to vote. She and other crossbenchers have previously requested pairs from Mr Dutton, who has only agreed to give them to Labor MPs.
"The referral of Mr Porter to the privileges committee is just one example of where a vote may have gone a different way if Mr Dutton allowed all crossbenchers to vote," Dr Haines said.
Labor leader Anthony Albanese complained 120 years of precedent were thrown out with the vote.
"Mr Porter has an obligation to declare where these donations came from," Mr Albanese said.
"If that doesn't occur, the register of pecuniary interests - a vital principle and process to avoid corruption in the parliament - is rendered redundant."
A former police integrity commissioner and counsel assisting the NSW Independent Commission Against Corruption, Geoffrey Watson, described the new precedent protecting Mr Porter from referral as "awful".
The senior counsel, who is a director of the Centre for Public Integrity, told ABC TV on Thursday Mr Porter should never have taken the money.
"It really makes you wonder why the government has stepped in behind Mr Porter to protect these donors from becoming publicly known. Why can't we know?" he asked.
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