Tax Office officials have revealed they heard "bureaucratic whispers" the Attorney-General George Brandis could seek to intervene in litigation to claw back close to $1 billion from the late Alan Bond's failed Bell Group of companies.

Key points: A-G Brandis has repeatedly denied claims of involvement in the failed Bell Group

A-G Brandis has repeatedly denied claims of involvement in the failed Bell Group The Senate Inquiry is investigating if Senator Brandis planned to stop the ATO from challenging the WA legislation

The Senate Inquiry is investigating if Senator Brandis planned to stop the ATO from challenging the WA legislation "We heard 'bureaucratic whispers' that led to speculation such a direction was being considered" ATO second commissioner, says

A Senate inquiry is investigating the extent of Senator Brandis' involvement in the case, after allegations a secret deal was struck between the Commonwealth and the West Australian Government to allow the State Government's claim to take precedence in the carve up of the company assets.

Senator Brandis has repeatedly denied the claims, and sought to distance himself from any dealings in the matter.

However Labor and the Greens banded together to launch a Senate inquiry into the matter.

In 2015, WA's then Liberal state government passed legislation that could have helped it jump ahead of other creditors in the Bell liquidation, including the Australian Tax Office (ATO).

The ATO successfully challenged that in the High Court, arguing it was unconstitutional.

But the allegation the Senate inquiry is investigating is that Senator Brandis, in his capacity as the nation's first legal officer, planned to stop the ATO from challenging the WA legislation.

"We had no knowledge of any proposed Attorney-General Direction but we did hear, and I think I have given this evidence before as well, bureaucratic whispers that led to speculation on our part that maybe such a direction was being considered," ATO second commissioner Andrew Mills told the inquiry on Monday night.

"We were concerned whether or not that would, whether or not were such a direction being considered, of which as I say we had no direct knowledge, it was merely just rumours flying around, that we really should be in a position to know how we should respond in that situation.

"We began to seek whether it was possible to obtain advice."

Those "whispers" happened in the days before the ATO lodged its notice of intervention in the High Court.

No direction was made by the Attorney-General, and the ATO has previously denied outside influence in the direction it has taken in pursuing the case.

Senator Brandis has previously stated he accepted the strong advice of the former Solicitor-General Justin Gleeson that the Commonwealth should join the ATO's challenge to the WA legislation.