A veteran staffer of former New South Wales energy minister Chris Hartcher says it broke his heart to give evidence against his long-time boss at a corruption inquiry in Sydney.

Ray Carter, Mr Hartcher's electorate officer, has spent a second day in the witness box at the Independent Commission Against Corruption (ICAC) inquiry into alleged Liberal Party slush funds and donations for favours.

On Monday, he admitted he had solicited donations from banned donors in the lead up to the 2011 state election and funnelled them through two alleged Liberal Party slush funds, Eightbyfive and the Free Enterprise Foundation.

He told the hearing Mr Hartcher had not "sanctioned" his actions, but he knew he was fundraising and would have known who some of the donors were.

As he left the hearing on Tuesday, Mr Carter said it had been "very difficult" to give evidence against Mr Hartcher, with whom he had worked for 40 years.

"I've said what I've said, I've had two hectic days, I was honest," he said.

When asked if giving evidence against Mr Hartcher had broken his heart, he agreed that it had.

Mr Carter also told the hearing he had personally handed $4,000 of laundered political donations directly to Mr Hartcher.

The inquiry has already heard allegations that Mr Hartcher himself laundered the donations through the trust fund of his old account Hartcher Reid, then had the money transferred to a firm called Mickytech.

Mickytech was owned by Mr Carter's partner, Ekarin Sriwattanaporn.

Mr Carter told the hearing he then withdrew the $4,000 cash from Mickytech's account and gave it back to Mr Hartcher.

Mr Hartcher's barrister Alister Henskens SC suggested that Mr Carter and his partner may have pocketed some of the money themselves, and that Mr Carter was giving false evidence to protect them.

Mr Carter denied that.

"I gave it back to Chris Hartcher, what he did with it I have no idea," he said.

Mr Henskens shot back: "I suggest that the evidence you have given is false, isn't it?"

Mr Carter replied: "It's 100 per cent true.

"I've been with Chris for 40 odd years, I don't like doing this, but I will protect myself."

Former political staffer accused of 'lying through his teeth'

Tim Koelma, a former political staffer who set up the alleged Liberal Party slush fund Eightbyfive, has been accused of "lying through his teeth" today at the ICAC.

Mr Koelma, who also worked for Mr Hartcher, insisted Eightbyfive provided legitimate marketing and political advice to the companies that it invoiced.

The inquiry has heard evidence the invoices were actually a sham designed to hide secret donations for favours.

Mr Koelma told the hearing he pitched his services to Nathan Tinkler's development firm Buildev, but he struggled to explain why he instead invoiced Mr Tinkler's horse stud, Patinack Farm.

"What, a horse stud and a building company... you couldn't draw a distinction between them?" asked counsel assisting Geoffrey Watson SC.

Tim Koelma. ( AAP Dean Lewins )

"Did you think that horses were developing properties did you?"

Mr Koelma said he did not understand the different entities in the Tinkler group.

"I was going to let you tell your story but I can't resist it," said Mr Watson, "you're lying through your teeth, aren't you?"

"I'm really not," Mr Koelma replied.

"Maybe I'm missing something."

Mr Watson said: "You are missing out on something Mr Koelma, you're missing out on the opportunity to tell the truth."

He then suggested to Mr Koelma that Eightbyfive was actually a sham company deigned to attract illegal donations, and that he and Mr Hartcher had set it up together.

"You, and this is you with Mr Hartcher, you set out to attract money from prohibited donors, didn't you?" Mr Watson asked.

Mr Koelma replied: "No."

Mr Watson said: "And you issued fake invoices in the name of Eightbyfive to cover it, didn't you?"

Mr Koelma answered: "Absolutely not."

The inquiry continues.