The NSW Labor Party has forfeited a $100,000 donation at the centre of a corruption inquiry, admitting there was evidence of a "scheme" to "hide the true source" of the funds.

Key points: The $100,000 donation to NSW Labor has been handed to the NSW Electoral Commission

The $100,000 donation to NSW Labor has been handed to the NSW Electoral Commission Labor's lawyer said it is clear that the people who made donations were not true donors

Labor's lawyer said it is clear that the people who made donations were not true donors The ICAC is investigating whether $100,000 was illegally donated to the party by billionaire Huang Xiangmo

The Independent Commission Against Corruption (ICAC) has been told the party had been keeping the money in a trust account but has now handed it permanently to the NSW Electoral Commission.

The ICAC is investigating whether fake donors were enlisted to disguise the $100,000 donation to NSW Labor from billionaire and banned donor Huang Xiangmo.

The inquiry has heard allegations that Mr Huang personally delivered cash in an Aldi shopping bag to Labor headquarters in 2015. He denies making an illegal donation.

There have been various explanations offered to the Commission about that alleged cash delivery.

Former Labor MP Ernest Wong said the cash was raised at a fundraising dinner and the billionaire had offered to deliver it personally, as a favour.

"There have been a lot of ... alternative facts and nonsense which has been put forward in this inquiry to hide the true source of the donations," Labor's barrister Arthur Moses SC told the hearing today.

"The party cannot be satisfied on any view at all that the persons who it's alleged made the donations at the dinner ... were true donors.

"In fact, it appears there is evidence that there may have been an offence or offences relating to a scheme to circumvent the donation or expenditure prohibitions... in the [legislation]."

Mr Moses also conceded that individuals within NSW Labor should have acted differently, both in accepting a delivery of cash and in their responses to investigators' questions.

"The ALP accepts this is a matter that should not have been allowed to get to this stage," he said.

After the ICAC executed search warrants on Labor headquarters in 2018, the party made an official complaint to the ICAC inspector.

Mr Moses said the party should not have not have called the ICAC's conduct into question in that regard.

"[The complaint] should not have been made and there'll no doubt be ramifications," he said.