Australian custom officials paid tens of thousands of dollars to people smugglers to turn around asylum-seeker boats and return to Indonesia, a local police chief in Indonesia said on Wednesday.

The police chief of Rote in the eastern Indonesian province of Nusa Tenggara, identified by media outlets only as Hidayat, said an asylum seeker boat en route to New Zealand was intercepted by the Australian naval forces in May, reported AFP.

The six boat crews, who are in Rote police custody on people smuggling charges, told Indonesia police that they were given $5,000 each by Australian custom officials to turn back and return to Indonesian territorial water, according to the Sydney Morning Herald.

"They were then told to take two smaller boats and turn back into Indonesia after the money changed hands. I saw the money with my own eyes. This is the first time I'd heard Australian authorities making payments to boat crew," Hidayat told AFP.  

The police chief informed that the six crews had $30,000 in total, kept in six black plastic bags. They also told police that an Australian customs officer named Agus fluent in Indonesia language handed over them money.

The boat was carrying 65 asylum seekers from Bangladesh, Sri Lanka and Myanmar. The boat people also have written a letter to New Zealand government informing about the incident.

A Bangladesh refugee, "Hassan," now in Indonesian detention, spoke to Radio New Zealand and confirmed the incident.

"They leave a notice for us saying 'never try come to Australia for settlement and never use Australian waters to go to New Zealand'. We were in international waters, that's why they went back," Hassan said.

Australian Foreign Minister Julie Bishop and Immigration Minister Peter Dutton have denied the allegations, reported ABC.

"It's been a longstanding policy of the government not to comment on on-water matters," Dutton replied when asked whether Australian government ever paid money to people smugglers to turn back asylum seeker boats, according to The Guardian.