Another New South Wales MP at the centre of a corruption inquiry has announced he will not recontest the next state election.

Charlestown MP Andrew Cornwell, who stood aside from the parliamentary Liberal Party on Wednesday, said he considered the interests of his electorate and his family in making the decision not to stand for re-election.

"Following my appearance at the ICAC (Independent Commission Against Corruption) yesterday I have thought carefully about what is in the best interests of the people of Charlestown," Mr Cornwell said in a statement.

"I have decided that I will not contest the next state election.

"Today, I tendered my resignation from the Liberal Party of Australia (NSW Division).

"I have sought parliamentary leave from the Speaker because these matters have significantly impacted my family and, while I take full responsibility for my own actions, I need to care for my family during this time."

The announcement follows Mr Cornwell's admission he paid his tax bill with a cheque from property developer Hilton Grugeon, which was given in exchange for an overvalued painting.

When asked why he did not refuse what was an illegal donation from a developer or take it to the police, he said: "It was a huge mistake."

Tim Owen 'knew' developers were paying staffer

The evidence before the ICAC made it as "plain as day" that Newcastle MP Tim Owen knew one of his election campaign staff members was being paid by developers, the commission has been told.

Liberal Party campaign staffer Josh Hodges has admitted he knew his work on Mr Owen's 2011 campaign was being bankrolled by Nathan Tinkler's development firm Buildev and developer Bill Saddington.

Mr Hodges told the inquiry he was told to issue fake invoices to the development firms for consultancy work, totalling about $10,000.

The counsel assisting the commission, Geoffrey Watson SC, put to him: "You would have known they were property developers and because of that prohibited donors?"

Mr Hodges replied: "Yes."

Mr Watson then asked: "Did you understand that this was a scheme, the point of which was to avoid the electoral funding laws?"

"I did, yes," Mr Hodges answered.

Mr Watson tendered text messages and phone records that he said showed Mr Owen knew Mr Saddington and Buildev were paying Mr Hodges' wages.

One text message Mr Owen sent on February 1, 2011, said: "Would Bill Saddington be happy to start paying him ASAP?"

Mr Watson said it also appeared that Mr Owen intervened when Buildev was late to pay Mr Hodges.

When the money had not come through four months after the election, Mr Owen's campaign manager Hugh Thomson sent a text message asking him to call "DW" and "lean on him - it's been promised for months".

Mr Owens replied: "Will do."

Phone records show Mr Owen then called Buildev executive Darren Williams, and the inquiry heard the money was then paid to Mr Hodges.

"It's plain as day looking at all of this that Mr Owen was aware of the involvement of Buildev," Mr Watson said.

Earlier, Mr Hodges told the hearing he had had discussions with Buildev about its plans to build a coal loader in Newcastle.

Mr Watson asked him if he could see anything wrong with a property developer pitching a proposal to a politician and his adviser while illegally bankrolling that politician's campaign.

Mr Hodges replied: "He can't achieve a lot when he's not in Parliament."

He said Buildev would have made donations to get "an ear" or "access", but not an approval for the coal load project.