NSW MP claims he 'didn't really understand the rules' on political donations

Suspended NSW Liberal MP Tim Owen, who has admitted to receiving banned developer donations, claims he didn't understand the state's election funding rules.

The beleaguered Newcastle MP has told the NSW Independent Commission Against Corruption (ICAC) donors were partially controlled by former NSW police minister Mike Gallacher.

Mr Owen, a former high-ranking RAAF officer turned NSW Liberal politician was preselected for the 2011 state campaign in December 2010, the day after returning from the Middle East.

He was busy at work and "didn't really understand the rules" prohibiting donations from organisations such as property developers and cigarette producers, the corruption inquiry heard on Monday.

Political donations from developers have been banned in NSW since 2009.

When seeking money for his campaign, Mr Owen thought it best to check with campaign manager Hugh Thomson.

"I always told everybody that I'm happy for you to donate in a legal way but you have to talk to either Hugh (Thomson) or Mike Tyler (former chair of Newcastle Knights) or Mike Gallacher. If they think it's legal I'm comfortable with it," Mr Owen said.

He told the inquiry said Mr Thomson and Mr Gallacher and others had told him: "We will look after the money side of it but if you have potential donors, send 'em our way - we are decision makers in this process".

Mr Owen announced in May he was quitting politics at the 2015 March state election in light of allegations he received money from banned donors, including Nathan Tinkler's Buildev group.

At the time, he claimed to have "no knowledge" of funding irregularities but conceded it was "highly likely" prohibited donors gave money.

Mr Owen said on Monday he didn't return the donations with political favours.

"They got nothing out of me," he told the inquiry.

Mr Owen's campaign co-ordinator Joshua Hodges last week told the ICAC Mr Thomson told him to bill local business Saddingtons as part of his $10,000 fee for three months' work.

Tinkler's Buildev organisation was also charged.

Mr Owen conceded it was a scheme to subvert electoral fundraising laws.

He is the eighth state Liberal MP to be sidelined by the ICAC investigations into party fundraising activities.

Barry O'Farrell resigned as premier and a number of MPs have withdrawn from the party and retreated to the crossbenches.

Before entering parliament in 2011, Mr Owen had a distinguished career in the Royal Australian Air Force.

He was the deputy commander of the Australian forces in Afghanistan and Iraq and was made a Member of the Order of Australia in the military division.

Mr Owen and government whip Andrew Cornwell stood down from the Liberal Party on Wednesday.

The inquiry in Sydney continues.