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The preliminary agreement between the major parties on foreign donations has broken down with Labor expected to reject curbs on activist groups such as GetUp. Photograph: Torsten Blackwood/AFP/Getty Images

Liberal and Labor parliamentarians have failed to reach a consensus on banning foreign donations to political parties with Labor now expected to reject curbs on activist groups such as GetUp.

The joint parliamentary committee on electoral matters is due to bring forward an interim report on foreign donations on Friday after being given an extension of time in an attempt to build cross-party agreement.

Guardian Australia understands there was preliminary agreement between the major parties on a working draft of the report late last week but the deal broke down last weekend.

A copy of the working draft made its way to some activist groups, who were alarmed by the thrust of the recommendations, and intensified their lobbying efforts.

Labor is now expected to produce a dissenting report, which will argue foreign citizens and entities should be banned from making donations to political parties and associated entities, which includes some but not all trade unions but will draw the line at extending the ban to activist groups.

The Greens, who are also expected to issue a dissenting report, support a ban on overseas donations to political parties and associated entities but do not believe the ban should extend to activist groups.

The Greens believe restrictions for activist groups should not apply before writs are issued because a blanket donations ban would harm groups including environmental, religious and public health groups taking part in civil society, including advocacy and delivering other programs outside election time.

The Liberal Democrat senator David Leyonhjelm opposes a ban on foreign donations and peppered witnesses with questions suggesting there was no problem to be fixed. Other members of the committee believe he will issue a further dissenting report.

Labor has been telegraphing concerns in recent weeks that the government wants to cross the line between regulating campaign finance for electioneering purposes and regulation that could be interpreted by the courts as curbing activism.

Bruised by coordinated campaigns from progressive activist groups against the Coalition in marginal seats during the 2016 election campaigns that supplemented a massive field operation from the ALP and trade unions the government has signalled on several occasions it wont countenance reform of the donations and disclosure regime that applies only to political parties.

The government has made the point that third-party activist groups are now significant players in the Australian political system, and you create an asymmetry if you regulate political parties but not other actors capable of influencing the political system.

The special minister of state, Scott Ryan, told Guardian Australia last September: Theres no point regulating political parties to within an inch of their life and then saying its a free-for-all elsewhere.

Coalition sources have told Guardian Australia agreement has broken down through the joint committee process because Labor has been pursuing a GetUp exemption and that is unreasonable at a time where activist groups run overt political campaigns.

The committee, which has been charged with reviewing the conduct of the 2016 federal election, and with looking at the donations and disclosure system, managed to produce a consensus report on authorising electoral messages in the first phase of the inquiry.

If the government intends to pursue a proposal on foreign donations that Labor cant ultimately support, it will have to run the gauntlet of the crossbench.

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Liberals and Labor fail to reach agreement on banning foreign ... - The Guardian