The Catholic Church has expelled an inner-Melbourne priest after allegations of sexual impropriety as the sex abuse royal commission begins its Melbourne hearings into decades of abuse and alleged cover-ups.

The disclosure that the priest's alleged victim received a financial settlement from the church and refused to assist police has led to the accusation that the church paid hush money. Father Mato Krizanac, 60, of the Croatian Catholic Centre at St Nicholas' church in Clifton Hill, was the subject of a 12-month internal investigation by the church's independent commissioner, Peter O'Callaghan, QC, of the Melbourne Response, and the Archdiocese of Adelaide, where the alleged offences are said to have taken place in the mid 1980s.

Parishioners at St. Nicholas' Church in Clifton Hill. Credit:Angela Wylie

Archbishop of Melbourne Denis Hart told Father Krizanac in June that he would be permanently stripped of all clerical duties, while parishioners were believed to have been informed at Mass on Sunday.

A spokesman for the Archdiocese of Melbourne confirmed the allegations had been referred to South Australian police in April 2013 - a month before Father Krizanac was placed on "administrative leave'' by the church.