SYDNEY (REUTERS) - The police minister of Australia's most populous state resigned on Friday after being linked to a plot to illegally funnel political donations from a property development group owned by embattled Australian tycoon Nathan Tinkler.

New South Wales (NSW) state police minister, Mr Mike Gallacher, resigned after the NSW Independent Commission Against Corruption heard evidence that he was involved in a scheme to funnel political donations from Buildev, which is owned by Mr Tinkler.

Property developers are banned from making political donations in the state, and the scheme is believed to have been devised to circumvent those rules in order to buy influence with the government.

"I have made the decision that I should not remain in this office when such a serious allegation has been made against me," Mr Gallacher told reporters.

He is the latest official to be caught up in a wide-ranging state investigation into corruption, that has ensnared a top officials from Prime Minister Tony Abbott's Liberal Party.

Mr Gallacher joins Senator Arthur Sinodinos, who stood aside as assistant treasurer in the national government, and former NSW state Premier Barry O'Farrell, who resigned after it was revealed that he had misled the inquiry about accepting a A$3,000 (S$3,484) bottle of wine as a gift.

The police minister's resignation is more bad news for Mr Tinkler, a former mining magnate, who has in recent months sold off many of the trappings of his quickly-found wealth, including a luxury car collection, while liquidators have seized his private jet and helicopter.

But he retains his other personal passions - the rugby league and soccer teams in the coal port of Newcastle, his adopted hometown north of Sydney.