Professor George Williams makes the argument in his submission to an expert panel commissioned by Premier Mike Baird to report on reform options for NSW election financing.

"Serious breaches by a serving politician should also lead to their automatic expulsion from Parliament," Professor Williams says.

"If a person gains an unfair advantage in an election, and so breaches the trust of the people who voted for them, it seems only fair that they lose their seat."

The submission comes a fortnight after former Liberal MPs Andrew Cornwell and Tim Owen resigned from Parliament after admitting to the Independent Commission Against Corruption they took $10,000 each in illegal donations for their campaigns.

Mr Baird called on MPs to consider their positions but rejected a Greens motion to expel the MPs from Parliament, arguing it would set a bad precedent and it was a decision they needed to make themselves.

In his submission Professor Williams, Anthony Mason Professor of law at the University of NSW, also calls for vastly increased financial penalties and scrapping of the three-year deadline for prosecutions of election funding offences.

He notes that at present if a politician or political party is caught breaching donations laws they face a fine of only $11,000.

"The penalty is too low and the possibility of prosecution too remote to provide a sufficient disincentive," he says.

He argues the maximum financial penalty should be increased to $110,000 and the three-year limit on prosecutions repealed.

Mr Baird has asked a panel led by businesswoman Kerry Schott to examine options for an overhaul of NSW election funding laws.

The move followed evidence at the ICAC about illegal slush funds run for Liberal candidates and allegations the Liberal Party rorted donations laws to finance its 2011 state election win.

The central question the panel has been asked to consider is whether a system of full taxpayer-funded elections is "feasible and in the public interest".

Mr Baird has advocated strongly for such a system. But Prime Minister Tony Abbott has argued against it, declaring "it's right that political parties have to go to the public and seek support that way rather than just being able to rely solely on the taxpayer".

Professor Williams says full taxpayer funding is neither feasible nor in the public interest.

He said it would impose a high cost on taxpayers without a guarantee of reducing corruption and may be unconstitutional as it would ban private donations – something the High Court last year ruled is a restriction of political expression.

Donations should not be eliminated but restricted to "a low level" and continuously disclosed during an election period, Professor Williams says.

The expert panel is due to report by December, but Mr Baird has said he wants interim measures put before Parliament by the end of September so they can be in place for the March 2015 election.

The Liberal Party is considering a model involving a cap of $1.7 million on the amount of private donations able to be raised by the major political parties and reducing the amount they need to raise and spend on a campaign in order to qualify for taxpayer funding.