Former Gunns chairman John Gay will not be forced to pay back an estimated $800,000 he made from insider trading.

The Australian Federal Police has confirmed the former boss of the collapsed Tasmanian timber giant will not face proceeds of crime action.

“The AFP can confirm it received a proceeds of crime referral in relation to this matter on 28 August 2013,” a spokesperson said in statement.

“Following an evaluation of material in relation to this matter, a decision was made not to proceed with any proceeds of crime action.”

No further reasons were given for the decision.

Gay, 70, was fined $50,000 after changing his plea to guilty on the day his trial was to begin last year.

He admitted trading around $3 million worth of Gunns shares with inside information not available to the market.

In court hearings, the prosecution estimated his windfall at more than $800,000, a figure challenged by Gay’s lawyers.

At the time, the Australian Shareholders’ Association slammed the fine as too lenient when Justice David Porter handed it down in the Tasmanian Supreme Court.

Justice Porter said the crime fell into a less serious category because Gay had decided to sell the shares in ill health and before he had the price-sensitive information.

He had faced a maximum penalty of five years’ jail or a $220,000 fine.

Gay has applied to be allowed to manage companies again, a move that is being opposed by the Australian Securities and Investments Commission.