Labor minister Don Farrell has accused teal independents of hypocrisy over election reforms after the crossbench accused the government of a "political stitch-up".

Senator Farrell, the minister in charge of electoral matters, is preparing a bill to change election spending rules.

The bill has not been finalised, but a government source close to deliberations told the ABC it would include a cap on both election donations and on candidate expenditure.

The crossbench wants a donations cap but no expenditure cap.

Independent MP Kate Chaney, whose own proposal for electoral reform has been endorsed by most of the crossbench, said an expenditure cap could make it hard for new independents to compete against incumbents and major parties.

"It's hard to structure a spending cap that is actually fair to new challengers, because of the significant incumbency and party advantages. I'm open to considering a cap proposal from the government that is fair, but I haven't seen one yet."

But Senator Farrell criticised this position. "Some of the teals are saying to us that they agree with banning big money, just not theirs," he said.

The government's plans

The government has publicly committed to a cap on donations and expenditure.

It has also committed to requiring 'real-time' disclosure of political donations above $1,000. The current threshold is over $15,000 and as a result a large proportion of donations are anonymous. This will also be included in the bill.

That idea is supported by the Greens and crossbenchers, but the Coalition has argued it would lead to donors being harassed by activists.

The government has not finalised a model for either the donations cap or the expenditure cap, but has flagged that any cap would need to be set at a high level to withstand a High Court challenge.

It expects such a challenge from Clive Palmer, who repeatedly makes extremely large donations to his own party. Mr Palmer has already threatened to challenge any legal change, regardless of its content.

Ms Chaney's proposal also set a high bar for a donations cap for the same reason. Her proposed donor cap would stop any individual, business or organisation from donating more than 2 per cent of the total public expenditure given to candidates and parties.

She said this would have applied to four candidates in the 2022 election, including Mr Palmer's Mineralogy, bipartisan donor Anthony Pratt, and teal donor Scott Farquhar.

The government plans to bring its bill forward by the end of the year, but the source told the ABC that if the bill passes too late in the year the changes would apply in two elections' time to give parties and candidates time to adapt.

The government has met with the Greens, crossbenchers and the Coalition to discuss its plans, although the source said the Coalition had been slower to engage.

Some crossbenchers said Senator Farrell had told them "bipartisan" support for the government's reforms were essential but that crossbench support was less so.

Greens senator Larissa Waters has accused the government of "a stitch-up to entrench the dominance of the major political parties."

Ms Chaney compared it to "putting Coles and Woolworths in charge of supermarket reform".

But the government source said the government had found its dealings with teal independents particularly frustrating and were surprised at Tuesday's decision to attack the government at a press conference.

Prime Minister Anthony Albanese alluded to this in Question Time when he was asked a question by Ms Chaney and responded by suggesting the crossbenchers had been "lobbyists" for their own interests.

Truth in advertising

The government is also committed to pursuing a law to enforce truth in election advertising, using a longstanding model in South Australia as a precedent.

The source said the government would release its own model before the next election, but that getting it right would be difficult.

A key obstacle is the Australian Electoral Commission's publicly-stated reluctance to administer any standard, which could see them dragged into the political fray to adjudicate on controversial questions.

The crossbench supports the idea, which has long been championed by independent MP Zali Steggall and is included in Ms Chaney's bill.

The Coalition's position is ambiguous. Coalition members on the parliamentary electoral matters committee were not in favour, but Opposition Leader Peter Dutton said last week the idea was "probably welcome".

Separately, Senator Farrell has publicly committed to increasing territory representation in the Senate and suggested a larger House of Representatives could be warranted, but the timeline for progressing either of those matters is unclear.