A tough new law against "farm invaders" has sparked a Labor dispute over sweeping sanctions against activists at the same time as the party engages in a wider debate over its direction in the wake of its election defeat in May.

Labor caucus members are pushing back against the Morrison government's attempts to "wedge" the opposition into passing the new law, which imposes new federal penalties on those who incite others to trespass on or damage agricultural land.

Kim Carr warned that the "farm invaders" bill had troubling unintended consequences beyond its stated aim of stopping animal welfare activists. Credit:Alex Ellinghausen

While key Labor senators object to the government proposal, other caucus members believe they should help pass the law to avoid an unnecessary fight when their party faces a bigger test over its policy platform.

Labor energy spokesman Mark Butler called on Monday for a "ruthless and unsparing" review of the party's policies including a new approach on tax and climate change.