It was the "only sensible and rational explanation", Liberal Michael Ronaldson said in the Senate today.

The attack on Mr Thomson, MP for the New South Wales central coast seat of Dobell, came after he confirmed the Labor Party had provided money, but denied it had gone directly to him.

The ALP money might have saved Mr Thomson from bankruptcy. A bankrupt cannot sit in Parliament.

The money is linked to a defamation suit against a newspaper after a report claiming that when a health union leader he had used a union credit card to pay for prostitutes.

There is no policy inquiry under way and no charges laid against Mr Thomson. But the Opposition believes it might be able to force him out of his seat and produce a byelection which Labor might lose. That could end the minority Gillard government.

Prime Minister Julia Gillard today was again forced in Parliament to express full confidence in her colleague. Mr Thomson has declined to comment.

Late yesterday Mr Thomson updated his declaration of member's interests to acknowledge the ALP cash contribution, reported as much as $90,000.

"In May, 2011 the Australian Labor Party (New South Wales Branch) paid a sum of money in settlement of a legal matter to which I was party," said Mr Thomson, member for Dobell, in his declaration.

"While I was not the recipient of the payment for the avoidance of doubt I am updating my register of interests."

He also declared: "I have an open account with Kalantzis Lawyers relating to the above legal matter."

The cash should have been reported within 28 days of it being provided, but tardy declarations are not uncommon and are considered a technical breach.

For example, in June Opposition Leader Tony Abbott declared a $710,000 mortgage which he had taken out two years previously.

The significance for the Opposition was that the declaration confirmed the ALP had helped Mr Thomson get out of legal action he had taken against the Sydney Morning Herald.

There had been allegations Mr Thomson used a credit card of the Health Services Union to pay for prostitutes. He denied the claim and said his signature had been forged.

Mr Thomson started a defamation action against the Sydney Morning Herald but last June, just before it was to go to court, he withdrew it, leaving him liable for costs.

"And, of course, that begs the question as to why that might have happened," said Senator Ronaldson in the Upper House.

"For ordinary Australians, one of the reasons for him withdrawing might have been that he had no money.

"We know from evidence that has been put forward in the last 24 hours that he had as much money as he wanted from the Australian Labor Party.

"So the reason for pulling out could not have been the fact that he could not fund the case.

"The only sensible and rational explanation for him withdrawing virtually at the door of the court was that he was advised by his legal advisers that he could not win this case."