Facebook approached Australia's major political parties during the 2016 election with a new and powerful data matching tool, but Liberal strategists rejected the offer out of fear it could breach the law by sending voters' personal details to the social media giant's offshore servers.

The opportunity for "advanced matching" in Facebook's so-called Custom Audience feature could be used by campaigns as a way to target specific people - including undecided voters in marginal seats - with highly targeted online advertising.

Fairfax Media understands Labor has used the tool, however the party declined to say for how long and or reveal what information it may have allowed Facebook to access.

The tool would allow parties to match data they had collected about voters - such as ages, emails, phone numbers, postcodes, names and birth dates – against similar information listed by users on their Facebook profiles. The combination of the two data sets would allow parties to target Australians identified as swinging voters with tailored ads when they use Facebook.