Treasurer Josh Frydenberg is eligible to sit in Parliament, a trio of judges has ruled, averting a crisis for the Morrison government as it prepares a second stimulus package to counter the economic fallout from the coronavirus pandemic.

In a judgment on Tuesday afternoon, the Federal Court – Chief Justice James Allsop and Justices Susan Kenny and Alan Robertson, sitting as the Court of Disputed Returns – dismissed a challenge to Mr Frydenberg's eligibility brought by a constituent in his Victorian electorate of Kooyong.

Treasurer Josh Frydenberg earlier this month. Credit:Alex Ellinghausen

Michael Staindl alleged the Treasurer was disqualified from sitting in federal Parliament under section 44(i) of the Commonwealth Constitution on the basis he was a Hungarian citizen by descent, a claim Mr Frydenberg denied.

Under the Constitution, a person who is "a citizen ... of a foreign power" is ineligible to sit in the Australian Parliament.