Sydney - Wallabies coach Michael Cheika gave evidence on Saturday at a high-stakes code of conduct hearing as Israel Folau challenged Rugby Australia's intention to tear up his lucrative contract over homophobic comments.

The devoutly religious fullback was informed last month of plans to terminate his multi-year, multi-million-dollar deal after he posted on social media that "hell awaits" gay people.

It followed a similar row last year, when he escaped with a warning.

This time Rugby Australia and the NSW Rugby Union made clear they have had enough, issuing him with a "high-level" breach notice under the player code of conduct.

Super Rugby's all-time record try scorer and one of the sport's highest-profile players opted to challenge it through a tribunal, with experts warning of a protracted legal battle regardless of the outcome.

Neither Folau nor Rugby Australia chief Raelene Castle commented to the waiting media ahead of the hearing in Sydney, which will resume on Sunday.

"Israel Folau, Raelene Castle and Michael Cheika attended the hearing and provided oral evidence to the panel at Rugby Australia headquarters in Sydney today," Rugby Australia said in a brief statement.

"It is not expected that any further witnesses will be called to provide evidence on Sunday."

Submissions and evidence were heard behind closed doors by a three-member panel chaired by John West, an employment law expert and senior counsel.

It will decide what punishment, if any, is appropriate -- ranging from a fine to a suspension, or the sack. Either way, Rugby Australia said a decision was not expected this weekend.

Legal experts said the case would almost certainly go to an appeal whichever way it went, and then potentially to the courts for a lengthy, and costly, fight that could set a precedent for how much control sporting bodies have over athletes' public pronouncements

Giuseppe Carabetta, an employment law expert at the University of Sydney's Business School, described the case as a "perfect storm of conflicting religious, corporate sponsorship and moral issues".

"The Folau case may eventually involve not only RA's code of conduct but also aspects of contract law, anti-discrimination laws and employee rights under the Fair Work Act," said Carabetta.

"The case may well have a very long way to run."

Folau was set to argue that Rugby Australia did not include a specific social media clause in the four-year contract he signed in February and his posts were merely passages from the Bible and not directly his words.

The governing body was expected to counter that even if there was no clause, he seriously breached its broader code of conduct policy and its inclusion policy.

The player was likely to argue that rugby's "inclusion for all" should also take into account strong religious beliefs.

The controversy has overshadowed Australia's World Cup preparations, with Cheika vowing not to pick Folau again after his "disrespectful" comments.

"When you play in the gold jersey we represent everyone in Australia, everyone," Cheika said after the row exploded. "Everyone that is out there supporting us, we don't pick and choose."

Others in the Wallabies camp have also criticised Folau but some, particularly from Pacific Islands backgrounds, have reportedly been angered because they feel their religion is under attack.