Scott Morrison has defended blocking an investigation into former attorney-general Christian Porter receiving anonymous donations for legal fees.
The prime minister argues the government's decision to support a broader inquiry into crowdfunding of MPs' legal costs will address the issue.
House of Representatives Speaker Tony Smith said there appeared to be a case for referring the issue of Mr Porter's donations to the powerful privileges committee.
But the coalition used its numbers to block Labor's bid to send the matter to an inquiry.
Labor leader Anthony Albanese said the idea Mr Porter did not know where the money came from defied belief.
"Yesterday in the parliament we saw an extraordinary event - 120 years of precedent were thrown out," he told reporters in Canberra on Thursday.
Mr Morrison dismissed the opposition's outrage as playing politics.
"There are many other members of parliament who've been in this situation about how they fund legal costs to pursue defamation actions," he told the Nine Network.
"That's not just one member. There are other members and we've got to get the rules clear."
The prime minister said the privileges committee's broader inquiry could determine rules around how defamation actions against politicians were funded.
"Let's get those rules very clear for everybody," Mr Morrison said.
Mr Albanese said the speaker's ruling there was a "prima facie" case for further scrutiny had been defied.
"Mr Porter has an obligation to declare where these donations came from," he said.
"If that doesn't occur the register of pecuniary interests, a vital principle and process to avoid corruption in the parliament, is rendered redundant.
"No wonder Mr Porter never introduced the anti-corruption commission that was promised by Scott Morrison more than 1000 days ago."
Independent senator Jacqui Lambie joined the condemnation of the government avoiding an investigation into Mr Porter.
"It's a political donation - let's call it out for what it is - in a brown paper bag and it's absolutely disgusting," she told Nine.
Mr Porter last month disclosed anonymous legal donations were used to help fund defamation action he launched against the ABC.
The former attorney-general strenuously denied an allegation he raped a now-deceased woman in 1988, after the broadcaster broke a story an unnamed cabinet minister was the subject of the claim.
The case was settled before trial.
Mr Porter later resigned from cabinet over the so-called blind trust which helped fund his legal bills.
Australian Associated Press