Following a Senate estimates hearing in May the department told senators it engaged 23 contractors who used Plutus Payroll for payment while doing government work.

The figure is an increase on PM&C's initial estimate of nine, and comes after the ATO told Plutus clients they would not be penalised for any shortfalls in their tax contributions arising from the alleged $165 million scam.

Companies linking contractors to government departments paid money to Plutus on the basis it would be used to pay wages and salaries as well as PAYG contributions to the ATO.

But the Australian Federal Police alleges a percentage of the funds that should have been paid in tax was skimmed by a syndicate and spent on lavish lifestyle expenses in what is the largest suspected white collar fraud racket in Australia's history.

PM&C told senators it engaged the contractors who used Plutus through five labour hire companies: Programmed Professionals, First People Recruitment Solutions, Dynamo IT, Hays Recruitment and Clicks & Programmed.

The ATO last month assured contractors they would not receive penalties when income reported as withheld was not actually paid to the Tax Office.

"At tax time, the amounts withheld from their pay will be applied when their income tax liability is assessed," it said.

The scandal rocked the ATO after its deputy commissioner Michael Cranston was charged with allegedly abusing his position as a public official by accessing an audit into his son Adam Cranston.

Mr Cranston allegedly sought to pressure colleagues to cut a deal with his son after he learnt Adam was the subject of a major tax fraud investigation.

Clarification: A previous version of this story identified Horizon One as one of the labour hire companies that supplied PM&C with workers who used Plutus. This was incorrect information, given in a departmental response to a Senate budget estimates question on notice.