Prime Minister Scott Morrison has sought advice as to whether former attorney-general Christian Porter's decision to allow a blind trust to cover legal fees breached ministerial standards.
A spokesman for the prime minister said Mr Morrison had discussed the matter with Mr Porter, after the latter revealed legal bills in his defamation case against the ABC were partly funded through a blind trust called the Legal Services Trust.
"The prime minister is seeking advice from his department on any implications for the ministerial standards and any actions the minister must take to ensure that he meets the standards," the spokesman said.
"The prime minister is taking this matter seriously."
It comes as former prime minister Malcolm Turnbull lashed out at Mr Porter's decision to accept the blind trust, saying politicians should not receive money from undisclosed sources.
"This flies in the face of every principle of accountability and transparency in public life," Mr Turnbull told ABC radio on Wednesday.
"I am staggered that Porter thought he could get away with it and I will be even more staggered if the prime minister allows this to stand. It is a shocking affront to transparency."
On his register of interests, Mr Porter said he had no access to information about the conduct and funding of the trust.
He sued the ABC in March over a story that revealed a now-deceased woman's historical rape allegation against a cabinet minister.
The now-industry minister emphatically denied the allegation and the case was settled before trial.
The ABC paid $100,000 in costs and agreed to put an editor's note alongside the online story, stating regret that some readers misinterpreted the article as an accusation of guilt against Mr Porter.
Mr Turnbull said banks and political parties were banned from receiving cash from unknown sources and wants the same rules applied to MPs.
"It is so wrong. I'm astonished," he said.
The former prime minister said disclosure regimes were crucial to stopping the potential for corruption and influence in politics.
"This flings open the door to such extraordinary abrogation of responsibility and accountability," said Mr Turnbull, who was prime minister from 2015 to 2018.
"It honestly cannot stand. There should be absolute outrage about this."
Treasurer Josh Frydenberg defended his cabinet colleague, saying Mr Porter disclosed the fees in accordance with the rules for politicians.
"The point about Christian Porter's legal defence is he did not use taxpayers' money and that is very important," Mr Frydenberg told Sky News.
"Labor will continue with their vicious personal smears and campaigns. I don't think Australians have got time for it."
Opposition Leader Anthony Albanese said the idea Mr Porter did not know where the money was coming from was unbelievable and absurd.
He said it strengthened the case for a national anti-corruption commission.
"It'd be up this like a rat up a drainpipe to find out exactly where this money has come from," Mr Albanese told reporters.
"It's precisely the sort of issue that undermines confidence in our political system."
Shadow attorney-general Mark Dreyfus said the inquiry instigated by the prime minister was "nothing more than political cover for Scott Morrison".
"There's no need for an inquiry," he said.
"Mr Morrison should do his job, enforce his own ministerial standards and tell Mr Porter to either give the money back, or come clean on who his financial backers are."
A spokesman for Mr Porter told AAP the minister's disclosure was in accordance with the requirements of the register and consistent with previous members' disclosures.
Australian Associated Press