Tourism Australia knew Tourism Minister Andrew Robb and his family owned the Boathouse Palm Beach restaurant before it launched a taxpayer-funded campaign that featured the establishment as part of a $40 million marketing push.
Tourism Australia chief executive John O'Sullivan on Thursday night conceded the restaurant, which is half owned by Mr Robb and featured on its Restaurant Australia website, had derived a benefit from being listed.
But during a late night Senate Estimates hearing, Mr O'Sullivan said it was Tourism Australia's marketing division that had made the decision to feature the restaurant.
An angry Finance Minister Mathias Cormann lashed Labor senators Penny Wong and Sam Dastyari during the hearing for pursuing Mr Robb, declaring he was an "honourable man" who "has done nothing wrong".
At one stage in the hearing Senator Wong said the matter looked corrupt, but then withdrew the remark.
Senator Cormann said that the Tourism Minster had appropriately disclosed the interest in his family's restaurant.
"He is not a director of the business, for very good reason, there was no briefing to the minister's office about the list of restaurants," Senator Cormann said, adding the process had been run "entirely independently by Tourism Australia".
"This is ridiculous," he said. "This is not somethi ng where Mr Robb or his family obtained any inappropriate advantage."
Fairfax Media revealed on Wednesday that the Boathouse Palm Beach, which Mr Robb half owns through Ram Consultancy and which is half-owned by Mr Robb's daughter Pip and her husband Andrew Goldsmith, was being promoted.
Answering questions from Labor senators Wong and Dastyari, Mr O'Sullivan said Tourism Australia was aware of Mr Robb's Register of Members' Interests, which reveals Mr Robb's half-stake.
"We were aware of the minister's family investment in those particular restaurants…I started in the role at the end of March 2014, so when I started in the role," he said.
Mr O'Sullivan said being featured on the website was "open to any food and wine experience in the country, and it's a self-nomination process. So it's up to the individual's restaurant, the individual bar or cafe to actually nominate their business through that process".
Once a restaurant was nominated, Tourism Australia assessed the submission and approved the restaurant to be featured in the campaign website or simply listed it.
"So what you are saying is that you and the department were, first, aware that the Minster had a stake in this restaurant and secondly were aware that your own website was promoting them?" Senator Dastyari asked.
"I didn't answer on behalf of the department senator, what I said was that after I started at Tourism Australia I became aware of the minister's family's investment in those restaurants," Mr O'Sullivan responded.
"I'm amazed that at no point did no one in Tourism Australia realise this was going to be an issue?" Senator Dastyari shot back.
"It's actually an open process, it's a self-nominating process," said Mr O'Sullivan.
Asked later by Senator Wong what the value to a particular restaurant would be of being listed, Mr O'Sullivan said Tourism Australia hadn't valued an individual listing but "there is a benefit, obviously".
The "Restaurant Australia" campaign features about 800 cafes, restaurants and wineries and lists web links to 1700 establishments in Australia. It is part of a $40 million, 17-country marketing push and commenced in May 2014.
According to June 2013 Bureau of Statistics data, there are 69,885 restaurants, cafes, takeaway shops, pubs and bars in Australia.
On Thursday, Fairfax Media revealed that Prime Minister Tony Abbott and senior ministers Warren Truss and George Brandis approved Mr Robb's half stake in three Sydney restaurants - including Boathouse Palm Beach - as in line with the ministerial code of conduct.
