Former Victorian speaker Telmo Languiller and his deputy Don Nardella will not face criminal charges for claiming a special residence allowance.

Early in 2017 The Age revealed the then-speaker, Mr Languiller, claimed nearly $40,000 to live in Queenscliff away from his Tarneit electorate in Melbourne's western suburbs.

He was claiming an allowance designed for country MPs that maintain a home in the city for parliamentary purposes.

Days later it was revealed that his deputy, Mr Nardella, was living in an Ocean Grove caravan park, away from his Melton electorate and was also claiming the allowance.

Mr Nardella claimed hundreds of thousands of dollars for living away from his electorate.

He was forced out of the parliamentary Labor party over the scandal and promised to pay back some of the money.

The outrage prompted calls for a police investigation but in a letter to Shadow Attorney-General John Pesutto, the assistant commissioner said there was "insufficient evidence to support any criminal charges, and that there was no reasonable prospects of successful prosecution".

A Victoria Police spokeswoman said "a full and thorough investigation into this matter has been completed by Victoria Police and no charges will be laid".

"The matter is now considered closed and we will not be making any further comment," she said.

The dropping of the case will be welcome relief for the two retiring MPs but will once again give the Opposition an opportunity to paint the Labor government as rorters.

Mr Pesutto said "in the court of public opinion everybody knows that whilst these Labor MPs will not face and criminal charges, what went on was a rort".

"Today's advice changes nothing, these two Labor rorters ought to pack their bags and leave the Parliament," he said.

The scandal last year prompted the State Government to tighten entitlement rules, including restricting the second residence entitlement to MPs who actually represent rural electorates.

"The Government notes the conclusion of this investigation, as we continue to overhaul Victoria's out of date and inadequate MP entitlements system," a Government spokesman said.

In August last year, Mr Languiller, who is still a member of the Labor party, announced he would not be contest the next election, conceding his "error of judgment" and repaying the money.