Unions say a High Court challenge to new NSW election laws will test the freedom of community members to participate in elections.

Key points: Recently introduced laws have slashed the amount third-party campaigners can spend on elections

Recently introduced laws have slashed the amount third-party campaigners can spend on elections Campaigners who knowingly breach the new $500,000 cap face up to 10 years in jail

Campaigners who knowingly breach the new $500,000 cap face up to 10 years in jail Unions say it will stop different activist groups from working together

It follows the release of an FOI document, seen by the ABC, which reveals the NSW Government considered making it illegal for community campaigners to support specific candidates.

Laws introduced in May cap election-related spending by unions, environmental groups, and churches at $500,000.

Under previous rules the limit was set at $1.2 million for any group identified as a third-party campaigner.

In the High Court on Thursday, a coalition of unions will argue the cap is unconstitutional.

Unions NSW leader Mark Morey said the new rules "silence" more than 600,000 union members from advertising in both online and traditional media.

"If every worker who we represent in New South Wales put in a dollar — we would be over the cap," he said.

Mark Morey says the government is trying to outlaw political campaigning by unions and other groups. ( ABC News: Greg Miskelly )

"Yet at a federal level, Malcolm Turnbull can put in $2 million into the Liberal Party coffers and have that spend.

"We say that's disproportionate."

Constitutional lawyer Professor Anne Twomey expects the union case will argue that the cap unfairly limits political communication.

"Is $500,000 enough, maybe it is, maybe it's not in relation to a campaign that needs television, for example," she said.

"Maybe you need more than a million dollars?"

Laws prevent activists from working together

A State Government spokesperson said its new legislation delivered "integrity, transparency and accountability" to elections.

"Whilst there is widespread support for third-party participation in elections, within limits, third-party campaigners should not be able to drown out the voices of parties and candidates who are the direct electoral contestants," the spokesperson said.

Multi-million-dollar dollar campaigns like Stop the Sell Off would be illegal under the new laws. ( Facebook: Stop the Sell Off )

But the reforms also introduced tough new restrictions on third parties, banning them from acting "in concert" by pooling money into multi-million-dollar campaigns.

Mark Morey said the "fear of being prosecuted" would prevent unions, community groups and environmentalists from communicating and working together during elections.

Under the new legislation, multi-million-dollar union anti-privatisation campaigns, such as the "Stop the Sell-off", will be outlawed during elections.

Campaigners who breach the cap face police investigation, and possible prosecution.

Those who "act in concert" and are unaware of the law could face two years in jail, while those who knowingly breach the act may receive a 10-year jail sentence.

FOI document reveals political 'agenda'

A 2017 policy paper, released to Unions NSW under Freedom of Information, reveals the NSW Government originally considered tighter restrictions.

Sent to Minister Anthony Roberts, the paper pushed for a lower third-party spending cap of $300,000, and for group members to individually register with authorities.

It also suggested third parties be "banned" from advocating for "any specific candidate" and "any party or campaign or contributing advertising".

The paper warned "constitutional ramifications" of the reforms were "subject to discussion".

Mark Morey said the paper revealed the government had an agenda to restrict public debate.

"Our concern is this is just the first step in actually trying to silence the government's critics," he said.

"Our fear is they will go much further."

A government spokesperson said these concerns were unfounded and the final legislation followed independent advice.

The spokesperson said in the 2011 state election, no third-party campaigner spent more than $500,000.

And only three third-party campaigners spent more than $500,000 during the 2015 State election — of which, only one was a union.

A union source disagreed with the State Government's claims, telling the ABC court evidence would show that three trade union bodies — Unions NSW, NSWNMA and the ETU — each spent more than $700,000 during the 2015 election.

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Each side to fight for political freedom

Professor Anne Twomey expects the High Court will hear strong arguments around political freedom on both sides.

"On the one side you've got Labor and all these unions — and each one of them has their own cap — and … together they have disproportionately a greater amount of money," she said.

"But on the other hand … they also have a legitimate view that they should be able to put across, as part of political communication. So it's a very fraught area."

It may take months for the court to arrive at a decision, quite likely after the 2019 state election.

Unions say, if that's the case, they may seek interim orders to help participate in the election.

The NSW Government said it would wait for the court's decision before any further comment on the impact of election reforms.