New political donation rules, labelled the "toughest" in Australia, face defeat in the Victorian Parliament after the Opposition withdrew support for the laws.

The Opposition will also vote against a Government bill to establish an independent tribunal to set politicians pay, over concerns that the body will give politicians a pay rise in exchange for less perks and more transparency.

Premier Daniel Andrews introduced legislation that bans foreign donations and caps donations to political parties at $4,000 for an individual or organisation over four years.

But lucrative union fees to the ALP will be unaffected because they will not be counted as donations but rather as affiliation fees.

Mr Andrews said the laws would be the "strictest" in the country.

The Coalition supported the laws in the Lower House but after further scrutiny is now set to vote against the plan in the Upper House, where neither side controls a majority.

Samantha Ratnam said she was disappointed the Opposition withdrew its support. ( AAP: Mal Fairclough )

The fate of the bill will be decided by the Greens and crossbenchers, with the Greens indicating broad support.

Victorian Greens leader Samantha Ratnam said the legislation was "not perfect" but could not be put off any longer, accusing the Opposition of siding with big business.

"Strict limits on political donations are essential for good governance in Victoria and renewing faith in democracy," she said.

"People are sick and tired of their city being designed by big developers and their roads planned by Transurban. This reform is urgently needed to restore public trust."

Shadow Special Minister of State, Ryan Smith, said the Coalition was committed to real changes but "not fake electoral and donation reform".

"Daniel Andrews has proposed a model that is designed to give one political party a political advantage over others," Mr Smith said.

He said the Premier had an appalling track record when it came to acting with integrity and trust.

"From the very start of this process it was clear that Daniel Andrews wanted to limit some donations to his political opponents but allow the unions to continue to financially support the Labor Party with affiliation fees that would remain uncapped," he said.

Change not fair on smaller parties, independent MP says

The Coalition said it was committed to continuing discussions to achieve true and fair electoral and donation reform that was in the best interests of Victorians and taxpayers.

On the pay tribunal Mr Smith said the Coalition could not back a pay rise for politicians while Victorians struggled with cost of living pressures.

"Daniel Andrews has no policies to deal with cost of living pressures but instead is trying to give himself a pay rise," Mr Smith said.

The Reason Party's Fiona Patten is opposed to the donations bill, along with Rachel Carling-Jenkins from the Australian Conservatives.

Vote 1 Local Jobs MP James Purcell said it was the "worst bill he had ever seen" and would oppose it.

The two Shooters, Fishers and Farmers Party MPs are undecided.

Ms Patten said the proposed rules disadvantaged small parties and independents.

"The new structure disproportionately rewards parties with high numbers of primary votes and parties with large membership bases that can spread the funding across multiple donors and membership fees," she said.

Mr Jennings says the reforms are 'common sense' as the Government attempts to convince crossbenchers to support them. ( ABC News: Stephanie Anderson )

Government vows to push ahead

Victoria's Special Minister of State Gavin Jennings labelled the Opposition's position on the bill as an act of political stupidity.

But despite not having clear numbers to push the reforms through the Upper House, Mr Jennings said the Government would not walk away from it.

"This piece of legislation is too important for us to ignore, it's too important for us to allow the Liberal Party walking away from it not to proceed with the bill," he said.

"Every single sitting week we have to look at ways of getting to majority in the Upper House, that's what we're going to do this week.

"We're going to continue on to look at how we can get the support of other parties, because up until this week I was thinking I was going to get the support of every party to this important reform, because it was clear common sense."