Tony Abbott has instructed the Liberal party to accept no further donations from tobacco companies on the grounds that Labor was using the issue as a “distraction” in the election campaign with its promise to ban all tobacco donations to political parties.

But Abbott said he would only ask the Liberal party to refund the $2.6m donated by tobacco companies since 1999 if Labor promised to refund to union members the donations it had received from the embattled Health Services Union, and if Rudd himself refunded a “travel sponsorship” he received from a “German tobacco company”.

“I think that’s a fair deal,” Abbott said.

Rudd has said he was unaware a trip he took to Germany last year to attend the second Berlin foreign policy forum was funded by the Korber Foundation, which owns a company that makes machinery for the tobacco industry.

"That someone like myself, then as a backbencher travelling overseas to a conference hosted by a foundation, should have prior knowledge as to where a foundation, a German public interest foundation, may derive its funding from ... you just don't know those things and I didn't know it at the time," he said when asked about the trip recently.

He said it was wrong to “draw by inference a moral comparison between attending an international conference funded by an international foundation, which for the purposes of that conference or more generally has a range of funding sources, with the Liberal party in 2013 taking direct campaign donations worth millions of dollars to fund the political advertisements on the airwaves today”.

Abbott said Rudd was “like the [Hogan’s Heroes character] Sergeant Schulz of this campaign. When it suits him not to know he doesn’t know.”

Labor stopped taking tobacco donations in 2004. The Coalition has continued to accept donations. The Coalition at first criticised Labor’s recent announcement of a 60% increase in tobacco excise over four years, but then said it would retain the measure.