Australia's top audit office has been asked to urgently investigate a $423 million security contract that was handed to a company headquartered in a South Australian beach shack.

Paladin, whose Australian arm was registered to a beach shack on Kangaroo Island until recently, won the lucrative federal government contract through a restricted tender process.

The company provides garrison support and welfare services for Australia's off-shore detention regime in Papua New Guinea, at the cost of $20 million a month.

Source: Abdul Mohammad

Labor's immigration spokesman Shayne Neumann has asked the Australian National Audit Office to launch an urgent investigation into the contract.

"Given the letter of expenditure associated with these contracts ... I seek your urgent investigation," Mr Neumman said in a letter on Wednesday.

READ MORE Forgotten men on Manus are 'broken' one year since detention centre closed

The company reportedly won the deal despite not having enough money to start the contract and its founder having a history of bad debts.

The Home Affairs department was cagey when grilled about the deal in Senate estimates, with officials declaring there was a "strict performance management regime" on Paladin.

But Mr Neumann said documents released under freedom of information laws reveal Paladin is only required to "self-monitor and self-report" its performance.

Home Affairs Minister Peter Dutton said Paladin was providing "many services" under the lucrative agreement and has dismissed the scandal as a distraction by Labor.

But the opposition insists it must be investigated.

"This is close to half a billion dollars of taxpayers' money that Peter Dutton is trying to sweep under the rug and claim there's nothing to see here," Mr Neumann said.