The Government will move decision making on MPs' expenses to an independent body, as recommended by the Law Commission.
The commission has released its review of the Civil List Act which sets out the current framework for deciding salaries, allowances and other entitlements for politicians.
It says the framework is unclear and lacks independence and transparency.
It is recommending the Remuneration Authority which already sets MPs' pay, be expanded, and also take on the job of determining travel, accommodation and communication allowances for MPs and Ministers.
It says MPs need to be adequately supported in their roles, but the system also needs to protect taxpayer's interests.
The commission's outgoing president, Sir Geoffrey Palmer, says there has been a series of mini-scandals around MPs' expenses, and the system needs to change so that it is plain and clear.
Prime Minister John Key says the Government supports the move to an independent body.
Mr Key says the Government will consult the Speaker of the House and other political parties before introducing enabling legislation to Parliament.
He says it is his intention that the legislation be passed into law before the end of next year.
Mr Key says the move is inevitable.
It is supported by the Labour, Green and ACT parties.
Labour Party leader Phil Goff says the move to an independent body takes away the suspicion that MPs are feathering their own nest.
Green Party co-leader Metiria Turei says the public needs to have confidence in the system.
The commission also wants the Parliamentary Service opened up to the Official Information Act for greater transparency.
It says the amount of money docked from an MP's pay if they are away from the House for a long period of time without leave should be increased, from $10 a day to around $260 a day.
The Government is still considering its response to that recommendation.
The commission is not recommending major changes to the travel allowances held by former MPs and Prime Ministers, but says they should come under more scrutiny.