Liberal MP Ray Williams will remain on the NSW government frontbench despite claims he accepted thousands of dollars in illegal political donations.
Premier Gladys Berejiklian defended her new multiculturalism minister following allegations he received dozens of donations of $990 - just below the $1000 limit requiring public disclosure - from some of Sydney's most prominent property developers.
The NSW Liberal Party is investigating the issue after the Daily Telegraph reported the payments were funnelled through an organisation Mr Williams founded called the Hawkesbury Club between June 2012 and July 2013.
State director Chris Stone said the party was carefully reviewing its records and had so far determined that all the donations in question were made to, and processed by, the Liberal Party.
"They were disclosed by the party, in full, to the NSW Electoral Commission, regardless of their value," Mr Stone said in a statement on Wednesday.
Donors were made aware of their obligations regarding election funding laws, including warnings about illegal donations, he added.
Property developers have been banned from making political donations since 2010.
Ms Berejiklian said the Liberal Party was investigating whether the donors named in the media report were considered to be property developers under the current legislation.
The issue is now in the hands of the NSW Electoral Commission.
A commission spokesman told AAP the electoral body does not publicly verify "whether it is, or is not, conducting an investigation of a particular matter".
The premier says she will act if the electoral commission determines there is a case to answer.
"I will not tolerate any wrongdoing," she told parliament, adding that Mr Williams had assured her he acted appropriately.
Opposition Leader Luke Foley is astounded the premier hasn't stood Mr Williams aside.
"What more evidence does she need before she'll make the minister walk the plank," he told reporters in Sydney.
"There's an old Australian saying that 'if you nurse a mug he'll die in your arms'. She shouldn't be nursing this mug. She should send him packing."
The premier's hands were tied because she was beholden to factions within the Liberal Party, Mr Foley said.
Mr Williams has denied the "completely false" allegations.
"All donations made on behalf of a conference I have represented have been made directly to the Liberal Party of Australia, NSW Division, as is required by law," he told parliament.
The Castle Hill MP also flagged possible legal action against News Corp Australia.
"I look forward to my good name being cleared at which time I will consider my options regarding any further action I may take regarding the journalist and the Daily Telegraph," he said in a statement.
Almost $600,000 in public funding was withheld from the NSW Liberal party last year after the electoral commission found it had received unlawful donations in the lead-up to the 2011 state election - including from property developers.