Opposition leader Bill Shorten has instructed Sam Dastyari to resign as Labor’s deputy whip in the Senate and his position as the chair of a Senate committee into the future of journalism.
“Last night I spoke to Senator Sam Dastyari and told him to resign from his senior Labor positions in the Senate,” Mr Shorten said in a statement on Friday.
“It is not a decision I took lightly. I told Senator Dastyari that his mischaracterisation of how he came to make comments contradicting Labor policy made his position untenable,” the Labor leader said.
“I also told him that while I accept his word that he never had, nor disclosed, any classified information, his handling of these matters showed a lack of judgment.”
Mr Shorten said he knew his colleague would “learn from this experience”.
He said he asked Senator Dastyari to inform the Senate of the resignations as soon as possible. The Senate sits today, from 9.30am.
The move comes as senior figures in the Turnbull Government call for the controversial senator to resign from the parliament altogether, after a leaked recording of Sam Dastyari defending China's position on its territorial waters surfaced on Wednesday.
Those revelations came shortly after another report suggested the senator advised a Chinese donor on simple counter-surveillance techniques.
"I'm not saying it’s treason, what I’m saying is that Senator Dastyari’s position on the basis of what we know is completely impossible," Senator Brandis said on Thursday morning.
Senator Brandis said the audio was evidence Chinese donor Huang Xiangmo was "almost literally pulling the strings" of the outspoken Labor senator.
"These were deliberate, considered, scripted remarks and their advertant purpose was to send a message through the Chinese media that were a Labor government to have been elected, its foreign policy in relation to China would be at variance from what had been announced by the [then] Labor shadow minister Senator Conroy,” he said.
In the tape, Senator Dastyari appears to contradict official Labor policy on the South China Sea.
"The Chinese integrity of its borders is a matter for China," Senator Dastyari said in the audio from a press conference with Chinese reporters in June 2016 and published in various media outlets on Wednesday.
Senator Dastyari had previously said he had only "incorrectly" mumbled an answer to a question he should not have taken.
Ms Bishop called for Senator Dastyari's scalp saying the release of this audio tape is further evidence that his position as a parliamentarian is untenable.
"It is time for his lies and his cover-ups to stop," she told reporters in Canberra on Wednesday.
"Senator Dastyari must reconsider his position as a senator."
Defence Minister Marise Payne joined Ms Bishop in condemning the senator, saying his "recklessness" shows Labor can't be trusted on defence and national security.
"It is clear that Labor cannot be trusted and that they will say anything to Australian media while telling a vastly different story to foreign audiences," she said in a statement.
"This is a test of Bill Shorten's authority."
Pressure is mounting on Opposition Leader Mr Shorten to remove Senator Dastyari from Labor's frontbench - again.
"He's a serial offender when it comes to placing himself evidently under the influence of the Chinese government," Attorney-General George Brandis told ABC television's Lateline program.
After a brief spell in the doghouse last year, Senator Dastyari became deputy opposition whip in the upper house in February.
Labor frontbencher Mark Dreyfus said the senator must be given the opportunity to explain himself.
"I'm not going to hang, draw and quarter someone on air ... without hearing what Senator Dastyari might have to say," he told ABC radio.
The audio comes after the NSW Labor powerbroker was reported to have warned Chinese Communist Party-linked political donor Huang Xiangmo his phone was likely being bugged by intelligence agencies during a meeting in Sydney in October 2016.
The reported exchange took place just weeks after Senator Dastyari resigned from the frontbench over his earlier dealings with Mr Huang.
Prime Minister Malcolm Turnbull said Senator Dastyari was "not on Australia's side" - a claim he rejects.
"I expect Turnbull and the Liberals to smear me, but for he and his colleagues to suggest that I am not a true or loyal Australian is incredibly hurtful - and hurtful to all overseas-born Australians," Senator Dastyari told AAP.
Mr Shorten said on Wednesday the senator had told him he did not pass on any classified information because he had no access to such information.
Mr Shorten observed to Senator Dastyari it was not the first time his judgment had been called into question.
"But I certainly expect it to be the last."
The coalition government will introduce to parliament within the next fortnight new laws dealing with foreign donations to political parties and candidates.