Mr Guo, who is known to his neighbours as the "Chinese Gatsby" for his lavish parties, was in China this week on business when he read about Mr Hockey dobbing him in for a suspected breach of the foreign investment rules.

In response, Mr Guo instructed his lawyer Bridget Liu, at Slattery and Associates, to set the record straight. "It's an unfair accusation without any proof," Ms Liu said. "We won't deny there are unlawful purchases of second-hand homes, but it is up to the Treasurer to be prudent in making accusations."

At issue are claims that Mr Guo was granted approval to buy the historic Windermere residence for $11.45 million last August on the basis he would also add to the existing housing stock by building a new residence.

Mr Hockey was informed that the housing stock in question was simply a granny flat on the property, saying in a radio interview on radio 3AW: "I referred one of my own neighbours and found out they had got approval on pretty spurious grounds."

But Ms Liu said work on the already DA-approved plans for a second residence on the property is set to start in a matter of weeks.

"Our client has made arrangement[s] to redevelop the site and to commence construction next month," said a statement from Ms Liu.

Council records show the double 3500-square-metre block was granted approval for a "new guest pavilion with garage and workshop" to replace the existing guest house in early 2013.

Mr Guo bought the landmark 1858-era residence from Nick Langley, co-founder of fund manager Rare Infrastructure, and his wife Lorraine Tarabay, and quickly earned a reputation as the party-loving local following his spectacular 50th birthday celebration.

Mr Guo's generous hospitality has also made news in mainland China, where the retail entrepreneur is best-known for building an opulent floating residence dubbed "Palace on the Water" off the Shenzhen coast, near the Hong Kong border in southern China.

The "palace" became a source of intrigue for local tourists and quickly developed a reputation for hosting glamorous parties attended by the rich and famous.

"It had long been open to the public," Mr Guo told the Southern Metropolis Daily in a 2011 interview. "I don't know the vast majority of people who come. You don't even need to say 'I'm friends with the boss', you can just go straight in, you don't need to know me at all."

But authorities ordered the elaborate compound to be demolished in 2011 after ruling it had violated maritime regulations, and Mr Guo has kept a low-profile in the mainland before resurfacing in Hunters Hill.

"People tend to make the connection between wealth and corruption too easily," Mr Guo said in the Southern Metropolis Daily interview. "The 'palace' has nothing to do with corruption."

A spokeswoman for Mr Hockey declined to comment.