Part of the proceeds from a lavish New Year's Eve fundraiser for former police minister Mike Gallacher, which was attended by banned donors, was sent to the fundraising arm of the NSW Liberal Party, an inquiry has heard.

Former restaurateur Peter Doyle has given evidence to the Independent Commission Against Corruption (ICAC) about the $1,000 a head dinner, which was held at his harbour-side restaurant at Circular Quay on New Year's Eve in 2010.

Mr Doyle told the hearing that he contacted the then opposition police spokesman Mr Gallacher suggesting a New Year's Eve function would be "a good way to make money for the Liberal Party."

"He thought it was a great idea," he said.

Mr Doyle said Mr Gallacher told him that Restaurant and Catering Australia could bill the invited guests and make a donation to the Liberal Party.

He said he was not involved in the guest list for the dinner, which he estimated was for about 12 to 14 guests.

ICAC has previously heard that Buildev executives Darren Williams and David Sharpe, along with some of their family members, attended the dinner.

Mr Doyle said he was told that $5,000 from the fundraising dinner was donated to the Millennium Forum, the fundraising arm of the NSW Liberal Party and the rest went to Restaurant and Catering Australia.

Mr Gallacher's barrister, Arthur Moses SC, suggested that Mr Gallacher had told Mr Doyle that Mr Sharpe and Mr Williams should only pay cost price because the event was partly being run as a party fundraiser.

But Mr Doyle could not remember that.

Earlier the inquiry heard that the woman described as Joe Tripodi's "eyes and ears" in Newcastle confessed to her lawyer she had been involved in a leaflet campaign against former Labor MP Jodi McKay.

The anonymous "Stop Jodi's Trucks" smear campaign did massive damage to the then sitting member for Newcastle Ms McKay's bid to hold on to her seat in the 2011 election.

Lawyer Nick Dan told the corruption watchdog that when police began investigating the pamphlet campaign, Mr Tripodi's former aide Ann Wills told him: "I've done something silly ... I was involved with those pamphlets."

When asked if she ever suggested to him that Buildev, or Buildev executive Mr Williams were involved he said, "she told me the police have tracked it down to Joe Tripodi's printer and the pamphlets were funded by Nathan Tinkler".

ICAC has previously heard allegations that both Mr Tripodi and former treasurer Eric Roozendaal deliberately undermined Ms McKay as they worked to promote Mr Tinkler's plan for a coal loader.

Ms McKay supported a rival proposal for a container terminal.

Ms Wills previously worked as an aide to Mr Tripodi and was later employed by Buildev.