Paladin, whose Australian arm was registered to a beach shack on Kangaroo Island until recently, won the lucrative federal government contract through a restricted tender process.

The company provides garrison support and welfare services for Australia's off-shore detention regime in Papua New Guinea, at the cost of $20 million a month.

Labor's immigration spokesman Shayne Neumann has asked the Australian National Audit Office to launch an urgent investigation into the contract.

"Given the letter of expenditure associated with these contracts ... I seek your urgent investigation," Mr Neumman said in a letter on Wednesday.

The company reportedly won the deal despite not having enough money to start the contract and its founder having a history of bad debts.

The Home Affairs department was cagey when grilled about the deal in Senate estimates, with officials declaring there was a "strict performance management regime" on Paladin.

But Mr Neumann said documents released under freedom of information laws reveal Paladin is only required to "self-monitor and self-report" its performance.

Home Affairs Minister Peter Dutton said Paladin was providing "many services" under the lucrative agreement and has dismissed the scandal as a distraction by Labor.

But the opposition insists it must be investigated.

"This is close to half a billion dollars of taxpayers' money that Peter Dutton is trying to sweep under the rug and claim there's nothing to see here," Mr Neumann said.

Australian Associated Press