A Morrison government bill that would override state donation laws – including bans on developer donations, caps and other transparency measures – has been labelled unconstitutional by a leading academic.

On Friday a joint standing committee on electoral matters hearing examined the surprise amendments to the Coalition’s campaign finance bill, with University of Sydney constitutional academic Anne Twomey warning overriding state laws would be a “very, very serious problem both constitutionally and in terms of good policy”.

The stated aim of the electoral funding and disclosure bill is to ban foreign political donations and clarify rules around disclosure of spending by third-party campaign groups.

After Labor offered bipartisan support for the bill in a joint report in April, the government added two new amendments.

The amendments state that federal donation laws override state laws where donations “may be used” for commonwealth electoral purposes. Several academics have warned that donations without a stipulation on how they are spent would therefore be governed by federal laws, even if spent on state elections.

Federal law would therefore override state bans on political donations from developers and stricter caps on donations, expenditure and disclosure.

In Friday’s hearing, Labor MP and deputy chair of the committee, Andrew Giles, said that Labor would still like to progress the legislation but warned that the government had introduced “troubling” new elements “without notice or as it seems to me without warrant”.

“It is difficult to see how a government acting in good faith could have have done so, without alerting this committee, the Australian public and affected states of these matters.”

Twomey told the committee it was “perfectly legitimate” for the commonwealth to legislate to exclude state laws from regulating political donations that are used in federal election campaigns.

But she said the provisions “should be tightened up” because they appear to have the “unintended” consequence of applying federal law to donations that do not stipulate if they are for federal or state elections.

Under the bill including the amendments, a property developer in a state with a ban on developer donations could give money with no conditions but “with a wink and a nod”, allowing it to be used for a state campaign because commonwealth law would override the ban, she said.

“Where the commonwealth interferes with donations for state political campaigns, we’re heading into areas of unconstitutionality and inappropriate exercises of power,” Twomey said.

Witnesses from the Law Council of Australia and the Uniting Church synod of Victoria and Tasmania both supported Twomey, telling the committee the bill requires amendment so federal laws don’t override state law for donations that are spent in state campaigns.

Stein Helgeby, a deputy secretary of the finance department, told the committee the amendments aimed to achieve “consistency and clarity” about whether state or federal laws applied. Helgeby revealed the states had not been consulted.

“Nothing in the bill seeks to traduce the powers of a state,” he said. “Nor does it seek to eliminate their ability to put in arrangements for state electoral purposes.”

Helgeby said he believed the bill was constitutional, noting that no government deliberately puts forward legislation it believes to be unconstitutional.

The explanatory memorandum for the amendments states that the immunity “will not apply to gifts that are only able to be used for exclusively state electoral purposes”.

It said the purpose of overriding state disclosure laws was to prevent people from being discouraged from making small donations below the federal threshold.

“It is also intended to ensure that, where a person or entity is required to report [under federal law] … the person or entity is not subject to duplicative reporting requirements under state or territory law.”

Giles noted that the explanatory memorandum tended to support Twomey’s reading that donations made without stipulation would be regulated by federal law. That view was also backed in submissions by professors Joo-Cheong Tham and Graeme Orr.