Labor's federal executive will seize control of the troubled NSW branch in a historic bid to force through difficult reforms aimed at stamping out corruption.
In announcing that Labor's national executive will assume control of the NSW division for 30 days, Prime Minister Kevin Rudd said he wanted to ensure Labor was a modern, more democratic party.
Mr Rudd said the party must also be ''free of the taint'' of claims of corruption that have been raised by the state's Independent Commission Against Corruption.
It is the first federal Labor intervention into a branch in more than 40 years.
In a press conference on Thursday morning, Mr Rudd said "Like all Australians, I have been appalled by the allegations arising out of the NSW Independent Commission Against Corruption."
"I regard these as a necessary set of reforms."
"As a party we must stamp out a culture which has allowed this type of behaviour to take hold,' Mr Rudd said.
"The time has come to modernise the Australian Labor Party.
"We need to open the windows and the doors."
Labor's general secretary Sam Dastyari and the Left faction assistant secretary, John Graham, will remain in place but the powerful administrative committee will be sidelined during the process.
The reforms include the immediate expulsion from the party of any member found to have acted corruptly.
At present, expulsion of a party member can only be achieved via a complicated series of tribunals, including the administrative committee.
The new rules will also ban property developers from being candidates at a state or federal level or being involved in preselections.
The "zero tolerance of corruption" reforms include establishing independent judicial oversight of the NSW branch of the Labor Party.
Mr Rudd said he had asked the NSW branch to "dissolve the disputes and credentials committee, which has been too controlled by factions".
The tribunal will be overseen by a retired judicial officer and comprised of legal professionals "who must not be actively seeking elected public office," Mr Rudd said.
The Prime Minister has called for a a charter of rights to ensure the anti-corruption reforms are "binding for all members".
Mr Rudd has written to request that a "Labor ombudsman" be appointed so that rank and file members "can have their complaints heard and properly investigated ... by an independent and trusted person".
Mr Rudd wants rank-and-file members to comprise at least half of the people on the administrative committee - the main decision-making body of the NSW branch.
The takeover move is being viewed as a major win for Mr Dastyari and Mr Graham, who have been driving the process of party reform in the face of some internal resistance.
Last November Mr Graham called for a "one-strike" policy for misbehaving party members and urgent action on other reforms, including the direct election of the parliamentary leader, in the wake of corruption hearings involving former Labor ministers Eddie Obeid and Ian Macdonald.
He told Fairfax Media on Thursday: "I think Labor party members will welcome this intervention by the federal party."
Mr Dastyari emailed party members on Thursday morning to talk up the intervention, which he said would see NSW Labor implement "the highest political governance standards of any political party across Australia".
"It's time for the Labor Party to focus on the future and not the past, and this is what these changes do," Mr Dastyari said.
"I'm confident that the thousands of members of the Labor Party who have been waiting for the reform process to move forward will be very happy with the changes being made."
NSW Labor Opposition Leader John Robertson welcomed the announcement.
"I'm incredibly enthusiastic about what the Prime Minister is doing," he said.
"What the Prime Minister has announced today builds on my New Standard package and reforms I have already introduced in NSW following the 2011 state election and ICAC inquiries.
"I welcome the Prime Minister's decision to put his shoulder to the wheel on Labor Party reform. This sends a strong message to the community that we in the Labor Party won't ever stand for corruption."
In February, Mr Robertson announced a suite of reform measures including a ban on factional "binding" in caucus votes.
The practice of factions "binding" their MPs, or forcing them to vote as a block on an issue, has been identified as one way Mr Obied - a controversial powerbroker - maintained his influence over the former NSW Labor government.
Mr Obeid and Mr Macdonald are being investigated by ICAC over allegations of a criminal conspiracy to defraud NSW taxpayers of tens of millions of dollars by rigging a tender for a coal exploration licence.
The commission's findings are due to be handed down within weeks. Mr Obeid has vowed to fight any finding of corrupt conduct against him in the Supreme Court.
Mr Obeid and Mr Macdonald were expelled from the NSW Labor party earlier this month.
The last time there was a federal intervention in NSW was in 1971 following a report by then federal president Tom Burns into rorting in the division. Mr Rudd's takeover is regarded as arguably more significant.
Tony was dismissive of the Labor reforms announced by Mr Rudd.
"Now we have this so-called change in NSW," Mr Abbott said. "This isn't a corruption cure; this is an election fix.
"Mr Rudd was quite happy to be installed by the faceless men, then of course the faceless men sacked him, now he's happy with the faceless men because they've put him back.''
Mr Abbott described the anti-corruption reforms as a "joke".
"The only way to clean up the Labor Party is to give them time out in opposition so they can get their house in order".