The New South Wales Government has backed down on a proposal to slash the amount that can be spent on political advertising.

Unions and business lobby groups will be able to pour up to $1.1 million into their adverts ahead of next year's NSW election, after the Baird passed laws that did not include a proposal to cut the amount to $250,000.

The new election funding laws were pushed through late on Tuesday night, after the Government also abandoned a proposal cut taxpayer funding for smaller parties with no members in the Legislative Assembly or lower house.

The Parliament voted to allow what could be millions of dollars in taxpayer funds, to be paid to political parties for administrative purposes.

The $5000 cap on political donations for parties and $2000 for individual candidates remains, after both major parties buried a Greens proposal to lower the amounts to $1500 and $500.

Premier Mike Baird proposed changes be made as part of his anti-corruption drive.

Significant breaches of donations laws by Liberal candidates have brought down many members of Mr Baird’s team, revealed by the Independent Commission Against Corruption.

New rules carry increased penalties for breaking donation laws, while also delivering the major parties millions of dollars in extra funding in the hope they will not have to raise so many private political donations.

But the changes have been criticised already as they do not reduce the ability to raise and spend private funds.

In its original form, the bill sought to cut the total that third-party organisations like unions and business groups can spend on their own election advertising, from $1.1 million to $250,000.

Many saw the move as an attempt to hamstring loud campaigns conducted the Electrical Trades Union, which has slammed the LNP government for its plan to sell 49 per cent of the state's electricity network roles, as well as the Nurses and Midwives Association in its campaign against private sector involvement in public hospitals.

Amid threats of a High Court challenge if the laws passed, the government left the spending cap at $1.1 million.

An amendment added by the Shooters and Fishers Party has increased taxpayer funding to political parties for administrative purposes.

They can now claim $600,000 for their first three elected MPs and $100,000 for up to 22 subsequent members.

Independent MP for Sydney Alex Greenwich told Fairfax media that the increased administration funding is “nothing more than a cash grab, and has nothing to do with the way the next election is run”.