Special Minister of State Scott Ryan has decided to waive the debt owed to the government by former Family First senator Bob Day.
Senator Ryan told a committee hearing on Thursday he had taken advice on the issue and found that given Mr Day had performed his duties in "good faith", and noting his personal financial circumstances, the debt should be waived.
Mr Day was declared by the High Court to have been invalidly elected to parliament due to an electoral office leasing arrangement with the commonwealth.
He is also bankrupt after the collapse of his Home Australia group of companies.
The government wrote to him seeking the repayment of salaries, allowances and expenses, but has not publicly revealed the total amount of money sought.
He wrote back on May 20 saying he wanted the debt waived.
Debts against Mr Day's staff or third parties were not pursued.
Senator Ryan said the waiver of the debt was consistent with previous similar cases.
He rejected criticism of the process, saying departmental officials "acted in accordance with the law".
Another former senator Rod Culleton - who was also found to have been invalidly elected by the High Court - was also given the option of having the debt waived, but has not responded.
"The options outlined in the letters remain open to Mr Culleton," Senator Ryan said.
Labor senator Don Farrell told the committee Mr Day could have avoided the entire problem if he had taken up the Adelaide electorate office vacated when Senator Farrell lost his seat in 2013.
