A state's political donation and campaign funding laws have been ruled constitutionally invalid, in a case that could have national implications.

In a landmark 71-page judgment today, the High Court struck out Victoria's Australian-first political donation rules.

The court found part 12 of the Electoral Act, which regulates political donations and election expenditure, "impermissibly burdens" the Australian constitution's implied freedom of political communication.

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Victorian Labor introduced donation caps in 2018, limiting individual payments to candidates and parties to under $5000 each term.

But Labor, Liberal, and National parties were still allowed to withdraw unlimited sums from their respective fundraising bodies, known as nominated entities.

Other parties and independents could not set up their own nominated entities, with West Party candidate Paul Hopper and former independent candidate Melissa Lowe challenging the constitutional validity of the laws.

"All Australian voters want, is a level playing field," Hopper said.

"The High Court has recognised that the two major parties have been rigging the system to stop new parties and independents."

The Victorian government was ordered to pay costs to Hopper and Lowe.

Premier Jacinta Allan said the state Labor government would consider the High Court's decision before responding.

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"It would not be appropriate for me to comment without both reviewing the decision and also seeking advice," she told reporters after her new cabinet was sworn in.

In December, Allan announced a bill to allow smaller parties and independents to set up their own nominated entities and cap transfers from such funds at $500,000 for all parties and $50,000 for independent candidates over each election cycle.

However, the reforms were quietly dumped before the legislation passed both houses of state parliament in March.

South Australia, NSW and Queensland have followed Victoria in implementing caps on political donations.

There remains no cap on political donations or spending at the federal level.

Under reforms passed in 2025, the amount an individual can donate to a party's branch will be capped at $50,000 in a calendar year and election spending limited to $90 million for political parties nationwide.

The federal political donation law changes are not slated to take effect until the start of 2027.