Suspended NSW Labor boss Kaila Murnain has broken down in the witness box at an anti-corruption hearing, admitting she was “scared” when she provided misleading information to electoral funding authorities about a $100,000 donation.

Distressed, sobbing and reaching for tissues during her evidence before the Independent Commission Against Corruption on Thursday, Ms Murnain, 33, urged commissioner Peter Hall QC to “understand I would do something very different now”.

“I was scared,” she told ICAC.

ICAC is probing allegations that Labor was involved in an elaborate conspiracy to conceal the fact that a banned donor, billionaire property investor Huang Xiangmo, donated $100,000 in cash to the party, which he personally delivered in a plastic Aldi bag.

Ms Murnain has told ICAC that on September 16, 2016 – just days after former Labor Senator Sam Dastyari resigned from Bill Shorten’s front bench over money he took from Mr Huang to pay personal debts – she was informed by a Labor MLC Ernest Wong that the billionaire property developer was the true source of the $100,000 donation.

The donation was delivered to the Labor Party when Ms Murnain was assistant secretary, but at the time of the disclosure by Mr Wong she had been promoted to the top job.

Just a month earlier, in August 2015, Australia’s spy agency ASIO had secretly warned Mr Shorten and then prime minister Malcolm Turnbull about billionaire Chinese donors seeking political influence in Australia, specifically mentioning Mr Huang.

Both major parties continued to accept donations from him.

Ms Murnain’s evidence is that she first called Mr Dastyari for advice when she learned the news, as a personal friend and former NSW secretary.

She thought she then called Labor’s lawyers, Holding Redlich, but doubts emerged about her timeline of events on Thursday after ICAC was presented with text messages between the pair.

Ms Murnain has previously delivered sensational evidence she sought legal advice from Holding Redlich managing partner Ian Robertson, who told her to “forget” what she had been told about the $100,000.

When told the news by Mr Wong, she responded, “What the s–t!” and said she knew what the disclosure meant; that, if true, the $100,000 donation was illegal because Mr Huang was prohibited under NSW law, as a property developer.

Ms Murnain became tearful in the witness box when she described the breakdown of her friendship with Mr Dastyari.

“During the federal election, there were frequent meetings with a lot of people putting a lot of pressure on me to resign,” she said.

Ms Murnain said that Mr Dastyari took the same view and “I stopped engaging with him”.

Knowing there were concerns about the $100,000 donation being from a banned donor, Ms Murnain said she asked officials to check the ALP’s response to the NSW electoral commission.

But Mr Hall pointedly asked Ms Murnain if she had “quarantined” her knowledge of illegal conduct surrounding a $100,000 donation from her ALP colleagues and the NSW electoral commission.

“What good would that do if they didn’t have the full facts?” Mr Hall asked Ms Murnain.

“You knew they wouldn’t be able to give a proper answer because they didn’t have the relevant information.”

Ms Murnain claimed this was not “intentional”.

Ms Murnain arrived at the ICAC hearing on Thursday clutching the hand of her husband, Tom Hollywood, for a second day of evidence after learning overnight she had been suspended from her job.

She is not expected to return and is believed to be chasing a $300,000 payout.

There was a moment of defiance in her evidence, when she admitted she had learned of the end of her career from journalists.

“I read that in the media,” she said.

Sam Dastyari arrives to give evidence at the ICAC hearings. Photo: AAP

Mr Dastyari also gave evidence on Thursday, arriving at the hearing on a bicycle.

He produced text messages suggesting the pair met after Ms Murnain first met the ALP lawyer Mr Robertson.

“I very strongly, forcefully, advised her to go and see the lawyers,” Mr Dastyari said.

“She did not say she had already seen the lawyers.

“Ms Murnain was quite distressed. When Kaila is distressed, she becomes incredibly fidgety.”

As she left the hearing on Thursday, Ms Murnain looked up at a monitor as Mr Dastyari commenced his evidence.

She glanced up at the screen for a moment, and shook her head as she saw Mr Dastyari, before walking out the door.