Former prime minister Julia Gillard did not commit a crime and was not aware of any criminality committed by union officials during her time as a lawyer for the Australian Workers Union, the trade union royal commission has found.

But Ms Gillard demonstrated a "lapse in professional judgment" in her work for the AWU and at times gave "evasive", "excessive" and "forced" evidence to the commission.

Ms Gillard's demeanour during the commission's hearings contained an "element of acting", Commissioner Dyson Heydon found in his interim report released on Friday.

He also said Ms Gillard's "intense degree of preparation, her familiarity with the materials, her acuteness [and] her powerful instinct for self-preservation" made it difficult to judge her credibility as a witness.

While Ms Gillard was generally what judges call a "very good witness", she demonstrated "occasional evasiveness, or non-responsiveness, or irritability", Commissioner Heydon found.

In a statement, Ms Gillard said she welcomed Commissioner Heydon's finding she did not committ a crime.

"Decency would require those who falsely accused me to apologise," Ms Gillard said. The former PM also said the Commissioner had "made some comments about the evidence before him with which I do not agree.

"Australians may well ask themselves whether the millions of dollars the Abbott government has spent on a 20-year-old matter that was already in the hands of the police would have been better allocated to health, education or law enforcement."

The report recommends Victoria and Western Australia consider laying fraud charges against former officials responsible for the AWU Workplace Reform Association slush fund. The fund was allegedly used by union officials to embezzle hundreds of thousands of dollars from construction companies such as Thiess.

The fund was run by former AWU official Bruce Wilson, Ms Gillard's former partner.

In his interim report, Commissioner Heydon finds Ms Gillard put herself in a conflicted position by helping Mr Wilson establish the association while also acting as a lawyer for the AWU.

"Julia Gillard's conduct in this respect must be regarded as a lapse of professional judgment, but nothing more sinister," it says.

Mr Heydon found the AWU Workplace Reform Association's name was false and misleading because it was not officially connected to the AWU and its primary purpose was not workplace reform. But he found that Ms Gillard was not aware of either of these facts.

But in a damaging finding for the former prime minister, Commissioner Heydon accepted the word of an 84-year-old former builder over Ms Gillard's on the question of whether Mr Wilson had helped pay for renovations to her home in 1993.

Former builder Athol James told the commission that Ms Gillard had told him payments for the renovations were coming from Mr Wilson. Mr James also said he saw Wilson give Ms Gillard "wads of notes" to cover cheque payments for the renovations.

At a famous marathon press conference in 2012, Ms Gillard said: "I paid for the renovations on my home in St Phillip Street in Abbotsford."

She told the commission hearings: "I paid Athol by cheque. I never said to Athol that Bruce Wilson was paying for his work and I did not obtain cash from Bruce Wilson for the work Athol James undertook."

Commissioner Heydon accepted Mr James' testimony over Ms Gillard's, who had dug herself "an inflexible trench which she could not manoeuvre away from".

"Julia Gillard was in many ways a satisfactory witness," Commissioner Heydon found. "But the manner in which she uttered these words denying what Athol James said seemed to be excessive, forced, and asseverated.

"There was an element of acting in her demeanour. She delivered those words in a dramatic and angry way, but the delivery fell flat.

"She protested too much. She chose to fight him. It was a fight in which there could be only one winner. Unfortunately, she lost that fight. Athol James's testimony is to be accepted over hers. He was a witness of truth. His version of events was correct."

Ms Gillard said she categorically rejects suggestions that "anyone other than I paid Mr Athol James" for the work he performed.

A final report will be released late next year.