The Turnbull government is distancing itself from revelations that at least one Liberal Party official knew banned political donations to its NSW branch were being funnelled through a federal foundation.
Michael Yabsley, a former federal treasurer of the party, has confirmed he knew banned property developers and owners of licensed premises donated to the NSW Liberals through the Free Enterprise Foundation.
"Yes, I don't think it was a great secret about the fact that that was happening," he told ABC TV's Four Corners program on Monday.
"Now looking back on it, those practices are not acceptable and should not have been acceptable in the past."
Mr Yabsley has called for an overhaul of electoral funding.
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Finance Minister Mathias Cormann, who is also the coalition's campaign spokesman, distanced federal Liberals from Mr Yabsley's admissions.
"At a federal level, the laws are clear and all parties of course at all levels are expected to comply with the laws as the stand," he told reporters in Canberra.
The NSW Electoral Commission has withheld $4.4 million in public funding from the Liberals, after the party refused to detail donors involved with the foundation.
Cabinet Secretary Arthur Sinodinos, who was state treasurer at the time of the alleged funnelling, has repeatedly denied knowledge of the practice.
Senator Sinodinos in April refused to front a parliamentary inquiry into political donations, prompting Labor to refer his conduct to the Senate for further action.
The foundation has denied it ever broke the law or breached regulatory requirements.
In a separate development, it's been revealed slain gangland lawyer Joe Acquaro attended a 2008 fundraising lunch where Malcolm Turnbull was the guest of honour.
The lunch, organised by federal Victorian MP Russell Broadbent, was attended by fruit mogul Tony Madafferi, brother of jailed drug trafficker Frank Madafferi, and Joe Mirabella.
The prime minister's office confirmed Mr Turnbull recalled the Melbourne fundraiser but did not remember which guests were invited.
The Greens said the reports that indicate the Mafia is attempting to influence Australian politicians should send shockwaves through the campaigns of all parties.
Greens senator Lee Rhiannon will write to the Australian Federal Police on Monday to request an investigation into Mafia figures and political donations and bribery.
Labor leader Bill Shorten said both incidents highlighted the need for more transparency in Australia's political donation system.
Labor wants all donations over $1000 disclosed.
"Transparency is the sunlight which clears away all the dark corners in terms of fundraising and Australians I think have a reasonable expectation that that is what should happen," he told reporters in Perth on Monday.
