Victoria's Parliamentary Speaker has promised to repay an allowance of almost $40,000 he claimed for living in the seaside town of Queenscliff, more than 80 kilometres from Melbourne.

The Labor MP for Tarneit, Telmo Languiller, said he was entitled to claim the money, but conceded it did not meet community expectations.

"While all members who live more than 80km from Parliament can claim this allowance, I fully accept that in my circumstances it doesn't meet community expectations," he said.

"To that end, I will repay the allowance I received in full."

Mr Languiller, who earns a salary of more than $240,000, charged taxpayers the allowance designed to cover expenses for country MPs for a year until last November.

He had listed a rental property in Queenscliff — south-east of Geelong — as his primary place of residence, and maintained a second house in Footscray.

The Footscray home, which is also outside his electorate, is now Mr Languiller's official residence.

Allowance rules should be tightened, Speaker says

Under parliamentary rules, politicians are entitled to the "second residence" allowance if their home base is at least 80km from Melbourne's CBD and they keep a second property in the city.

His seat of Tarneit is about 25km west of Melbourne's CBD.

Mr Languiller later provided an explanation to the Parliament, in which he said he rented the Queenscliff property as a result of "complex family matters relating to marriage, children and parents".

"I recognise the community expects us to be prudent in expenditure of public funds. The claims for a second residence allowance in these circumstances do not accord with those expectations," he said.

"I apologise for this error of judgment."

Mr Languiller conceded the rules around MP entitlements should change.

"On reflection, I believe the system that allowed me or others to make a claim of that kind should be tightened and should be changed," he said.

In a statement, Premier Daniel Andrews said Mr Languiller would not preside over an audit committee examination of his claim.

"I welcome the matter being referred to the audit committee of Parliament, chaired by the Liberal President of the Legislative Council," he said.

"It's appropriate that the Speaker has removed himself from this process.

"I urge the audit committee to provide the Parliament with recommendations on the use of this entitlement as soon as possible."

Opposition calls for changes to country MP allowance

But Opposition Leader Matthew Guy said the Parliament's powerful privileges committee should examine the matter and urged Mr Languiller to release documents to justify his claim.

"If the Speaker can't provide basic information to justify his position then he's going to have to go," he said.

Mr Guy said the dated entitlements system needed an overhaul, so allowances were linked to an MP's electorate, rather than where they lived.

"We can't have a situation where city MPs can claim a country members' allowance. I just can't believe that is somehow allowable under the rules," he said.

Treasurer Tim Pallas said he did not believe the rules should change and MPs should instead use common sense.

"I don't believe it's a question of rules, it's a question of people understanding what the right thing to do is," he said.

"There's always a way around rules ... but there's no way around holding yourself to account to good conduct and the public's expectation."

Former speaker Christine Fyffe said Mr Languiller must carefully consider his position.

"Presiding officers are the administrators of the allowances, they set the rules, and it's almost like the policeman breaking his own laws," she said.

During the 2015-16 financial year, Mr Languiller spent more than $50,000 on six taxpayer-funded overseas trips, including two to his native Uruguay.

In November, Steve Herbert resigned as Corrections Minister after using his taxpayer-funded driver to chauffeur his two dogs around.