By chief political correspondent Simon Cullen

Photo: Christopher Pyne with the Coalition's Gillard-AWU file. (AAP: Alan Porritt)

Video: Opposition renews attack on Gillard during Question Time (7pm TV News ACT)

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Labor says Julie Bishop's position as Deputy Liberal Leader is untenable after she suggested Prime Minister Julia Gillard directly benefited from a union slush fund.

While working as a lawyer at Slater & Gordon, Ms Gillard provided legal advice for the establishment of the Australian Workers Union (AWU) Workplace Reform Association, saying that she believed it would be used for legitimate purposes.

Instead, the association was used as a slush fund by her then boyfriend, former AWU official Bruce Wilson.

Ms Bishop, who has been running the Coalition's pursuit of the issue, dramatically escalated her attack on the Prime Minister this morning by suggesting, for the first time, that Ms Gillard benefited from siphoned-off funds.

"The reason she didn't open a file within Slater & Gordon - a file that would have shown a new legal entity was set up - was because she and Wilson and Blewitt wanted to hide from the AWU the fact that an unauthorised entity was being set up to siphon funds through it for their benefit and not for the benefit of the AWU," she told reporters.

Labor frontbencher Anthony Albanese has jumped on the comment, accusing Ms Bishop of making a "very serious" allegation of criminal activity against the Prime Minister.

"You can't just make claims like that in politics without being prepared to back it up," he told reporters in Canberra this afternoon.

"And there are consequences for Ms Bishop's political situation if it is not backed up."

Video: Julie Bishop rejects suggestions she directly accused the PM of benefiting from the fund (AAP: Alan Porritt) (ABC News)

Mr Albanese said Opposition Leader Tony Abbott needed to declare whether he supported Ms Bishop's comment, or he should sack her.

"Tony Abbott can't hide behind silence, and he has to state whether he is 100 per cent behind the actions of his deputy leader or dismiss his deputy leader," he said.

Ms Bishop held a press conference late this afternoon where she rejected suggestions she had directly accused Ms Gillard of benefiting from the fund.

She said her previous comment about "their benefit" referred only to the two members of the association - Mr Wilson and Mr Blewitt - and not Ms Gillard.

Asked then if she was saying Ms Gillard was a knowing party to a fraud, Ms Bishop responded: "I still have questions to ask of the Prime Minister, and I'll certainly continue them.

"But she was certainly a knowing party to breaches of relevant laws in Western Australia.

"I said that yesterday, and I'll say it again today - the Incorporations Act in Western Australia was breached in a number of material respects."

Ms Gillard has consistently denied any wrongdoing in the matter, saying she provided the legal advice at the request of her clients and has rejected suggestions she knowingly benefited from any of the association's funds.

'Godwin Grech moment'

Video: Anthony Albanese calls for Julie Bishop to be sacked (ABC News)

For a second consecutive day, the Coalition has used Question Time to pursue the Prime Minister over the issue, quizzing her over who paid for renovations to her Melbourne home.

Ms Bishop wanted to know whether any funds from a $15,000 cheque signed by Mr Wilson in 1995, a portion of which was to go to a Melbourne builder, were used to pay for work on her house.

Ms Gillard responded: "I can guarantee that what the Deputy Leader of the Opposition refers to was not to my benefit and did not pay for renovations at my home.

"I have answered this clearly and publicly on the public record now since 1995.

"I paid for the renovations at my home. This is smear, pure and simple."

The Prime Minister then went on the attack, questioning why Ms Bishop held a meeting with self-confessed bagman Ralph Blewitt in Melbourne last week.

"The Deputy Leader of the Opposition has spent time with a man who has said he believes he is guilty of fraud and is looking for immunity from that fraud," she told Parliament.

The Prime Minister has described the meeting as Ms Bishop's "Godwin Grech moment", referring to a former Treasury official whose actions helped undermine Malcolm Turnbull's leadership of the Liberal Party.

Ms Bishop this morning said she met Mr Blewitt as part of her search for documents relating to Ms Gillard's work history, but it only lasted 10 minutes and did not result in any documents.

Ms Bishop again asked every question on behalf of the Opposition during Question Time, prompting the Prime Minister to taunt Mr Abbott about his silence.

"If the Opposition genuinely thought there was anything serious at the base of this, then why wouldn't the Leader of the Opposition have the guts to get up and do it himself?" she told Parliament.

 

Labor attacks Bishop over Gillard slush fund claim - ABC News (Australian Broadcasting Corporation)