Mr Gutwein was grilled by Labor deputy leader Michelle O'Byrne over the festival's funding grant during a budget estimate hearing on Tuesday.

In May The Examiner revealed the festival owes thousands of dollars in unpaid wages to artists and staff who worked for the inaugural Launceston comedy event.

Laughs of Launnie was held from March 18 to 24, with contracts stipulating the artists would be paid by April 15 at the latest.

The festival received a Department of State Growth grant of up to $120,000, which was released to the company in stages.

Ms O'Byrne asked where the funding came from because it didn't come from Events Tasmania.

State Growth secretary Kim Evans said Events was part of State Growth, but Ms O'Byrne said the event didn't meet the requirements of Events Tasmania.

Mr Evans said she would need to check the details of their assessment but advice was provided.

"The original request was not something we believed would be supported. There were several discussions between Events Tasmania and the event organisers in coming to some advice that we provided directly to the minister," he said.

Exactly where the taxpayer-funded grant came from could not be answered, so Ms O'Byrne put the question on notice.

In May, the festival was given $10,000 of the allocated grant after submitting a final report about the festival to the department, bringing the total grant money it received to $100,000.

Ms O'Byrne also asked Mr Gutwein if he had informal discussions with the organisers.

"After it was brought to my attention it was passed on to State Growth," Mr Gutwein said.

"I don't think I had any conversations at all, nor was I involved in any of the negotiations with regard to the funding of it."

Mr Gutwein denied giving any direction to State Growth other than to look at the event.

"I don't mind saying, in terms of where it fits in the national comedy schedule between the Adelaide Fringe and the Melbourne Comedy Festival, it was a great opportunity to be tested for Launceston," he said.

But Ms O'Byrne was quick to point out it hadn't been a great opportunity considering performers still hadn't been paid.

"There are professional comedians now who haven't been paid and are quite disparaging of the Tasmanian comedy market," she said.