An attempt by the Liberals to insert a potential legal time bomb into the electoral reform legislation and a Labor proposal that would give the ACTU a generous donation cap were main reasons an expected bipartisan deal on the bill imploded at the last moment this week.

Under a “purpose of bill” provision pressed by the Liberals, if there were a successful High Court challenge to part of the legislation, the whole package of reforms would be wiped out.

In the negotiations this week, the Liberals again pushed for the caps on donations and disclosure to be raised.

But more importantly, they had concerns about Labor’s proposed amendment in favour of peak bodies. While more generous caps for these bodies would also apply to the Business Council and similar organisations, the Liberals are particularly focused on the ACTU.

In the talks with the Opposition, the government proposed an amendment that would link the donation caps and the spending caps in the legislation. Special Minister of State Don Farrell has said that a cap on donations without a limit on spending would only benefit the already wealthy. But the government rejected the Liberals’ attempt to have every part of the bill linked.

If different parts of the legislation remain unlinked, a High Court decision striking out the caps could leave intact the measures covering disclosure and transparency – provisions to which some Liberals and Nationals are strongly opposed.

Clive Palmer, who met Farrell this week, has foreshadowed a challenge if the legislation passes. The government has been highly concerned to try to ensure the legislation would not be vulnerable to a court challenge on the ground of restricting freedom of political communication. Even so, some experts believe parts could be vulnerable.

The bill had been expected to be passed this week, but was pulled when agreement could not be reached. Farrell has said he will have further consultations over the summer, with the hope of having the bill agreed to in the scheduled February sitting of Parliament.

It has always been the government’s preference to have a deal with the Liberals, to guarantee the durability of the changes. But there is now also interest from some in the government in exploring the possibility of a deal with the Senate crossbench.

To pass the legislation via the crossbench, the government would need the Greens plus three out of the remaining ten crossbench senators.

The government believes the measures have advantages for the Greens while some of them also fit their policy positions. Among the non-Green crossbenchers there are several firm critics of aspects of the bill, although others have been less hardline in private talks with the government.

The Liberals remain hopeful of a deal.

There would be risks for the Liberals if the government was able to get an agreement with the minor players. That could mean the bill was altered in ways that were less acceptable to the Liberals than the present version.