The Turnbull government will move to ban foreign donations to political parties and third-party organisations such as GetUp when parliament sits in August.
The prime minister revealed the timetable as Labor and the coalition exchanged blows in parliament over the influence of Chinese donors.
Labor quizzed the foreign minister on her knowledge of a company, linked to a major Liberal party donor, called the Julie Bishop Glorious Foundation.
Chinese businesswoman Sally Zou, owner of the resources company AusGold, is a major donor to the Liberal party, contributing more than $400,000 between December 2015 and June 2016.
Ms Zou set up a company under the name Julie Bishop Glorious Foundation Pty Ltd in April 2016, but shortened it to Glorious Foundation soon after.
Oddly, she also lists her address on the LinkedIn website as "Parliament House, NSW".
Ms Bishop has admitted to having met Ms Zou on a number of occasions, telling parliament all donations to the Liberal party were declared in accordance with electoral laws.
"Until the matter was raised with me by the media a week ago, I had never heard of such a foundation," she said.
"At no time have I ever compromised government policy in relation to foreign affairs," she added.
Ms Zou has frequently tweeted support of coalition government policy, including Ms Bishop's launch of a foreign policy white paper.
Mr Turnbull said the government would introduce legislation in the spring sittings to ensure foreign donations could not flow through to parties and organisations such as GetUp and unions.
"Only Australians and Australian businesses (will) have the ability to have a say through donations into the political contest," he told parliament.
Labor, which has already administratively moved to ban foreign donations before any laws are enacted, had a poor track record, the prime minister said.
Labor senator Sam Dastyari resigned from the frontbench last year after a Chinese donor paid a travel bill for him.
"The leader of the opposition has a long way to go before anyone will take him seriously on foreign donations," Mr Turnbull said.
Independent senator Cory Bernardi said politicians could not be trusted to investigate themselves.
He cited a call he received from a Liberal operative after he raised the issue of Chinese donations to Senator Dastyari.
The official effectively warned off the former Liberal senator, telling him "we get money from these people too".
Senator Bernardi also cited the sale of Darwin port to a Chinese company, a $125,000 auction bid at Liberal Party fundraiser for time with the prime minister, and a $100,000 donation to the fundraising account of Andrew Robb when he was trade minister.
"With so many questions to be answered, we need to find how deep this influence and the influence of foreign agents go into politics in this country," he told parliament.
Labor has called for a parliamentary inquiry into foreign interference in Australian politics after a series of media reports into the issue.
A Four Corners-Fairfax investigation named two billionaires that domestic intelligence agency ASIO identified as having links to the Chinese Communist Party.
Between them, Chau Chak Wing and Huang Xiangmo donated $6.7 million to the major parties.
Treasurer Scott Morrison said the government was "keeping a close watch" on the issue.
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