A former top US spy has backed growing calls for Australia to ban foreign donations, but the Turnbull government says legislation to outlaw the practice won’t be ready until “later in the year”.

Speaking at the National Press Club on Wednesday, former US National Intelligence director James Clapper said he struggled to understand how allowing foreign money to flow into the Australian political process “serves the interests of democratic institutions”.

Stressing that he was not “targeting China”, he said: “What is the benefit in a democratic system having a foreign nation buying influence in the political processes of your country or our country?”

His comments come amid growing concern about possible foreign interference in the Australian political system, sparked by an ABC Four Corners investigation that alleged Australia’s sovereignty was being threatened by Chinese Communist Party influence.

“I see some striking parallels between what our two countries are experiencing at the hands of these two countries,” Mr Clapper said, referring to alleged Chinese activities in Australia and Russian interference in the US.

“I have seen just this week compelling evidence of potentially nefarious foreign interference in your democratic institutions and from where that interference apparently originates.”

On Monday, Four Corners broadcast allegations that the Labor, Liberal and National parties had continued to receive donations from two high-profile Chinese businessmen despite a warning from ASIO head Duncan Lewis in 2015.

Four Corners also alleged Labor senator Sam Dastyari had sought to assist one of the businessmen, Huang Xiangmo, in obtaining Australian citizenship.

Opposition Leader Bill Shorten has backed Senator Dastyari, and sought to pressure the government to support Labor’s private member’s bill to ban foreign donations to political parties.

Sam Dastyari was drawn into controversy around foreign donations. Photo: Getty

On Wednesday, Special Minister of State Scott Ryan said the government was still working on its own legislation, which would be released “later in the year”.

“I’m going to do it properly. The last thing that should happen here is that we pretend we solve a problem and we create loopholes through bad law,” Senator Ryan told the ABC.

Arguing the legislation would be “comprehensive”, Senator Ryan also denied claims he was targeting the progressive lobby group GetUp!, which waged a marginal seats campaign against the government at last year’s election.

“We can’t have a system where one TV ad can be paid for by foreign money during an election campaign and another TV ad can’t. GetUp! and other groups hand out how-to-vote cards. I don’t want to restrict that,” he said.

“But we do need to ensure we don’t have a situation, as has happened in the United States, where there’s great restrictions on political parties, but money gets funnelled into third parties that can have quite a dramatic influence on the political process.”

Foreign donations are banned in Canada, the United Kingdom and the United States, though the regulations differ in each country. New Zealand only allows foreign donations up to $1400.

In March, a joint parliamentary committee recommended that foreign donations in Australia should be outlawed, yet the Labor and Coalition members disagreed over how the ban should work.

Coalition MPs noted that some environmental groups were “actively participating in political campaigning but were still registered as charitable organisations”.

Labor opposed extending the ban to these groups.

Meanwhile, a report released on Wednesday from the Human Rights Law Centre warned that any ban on foreign donations that covered not-for-profit groups engaging in “political activity” would be a “step in the wrong direction”.

The report said such a ban could disadvantage community groups “working for social good” while “not capturing other groups such as the Minerals Council of Australia”, which are funded by membership fees from foreign-owned companies.