Ms Hanson was ordered to pay the amount in October after the Federal Court said her comments on Nine's Today programme in March 2019 were "seriously damaging" to Brian Burston's reputation.
As well as incorrectly stating that Mr Burston had sexually abused a female colleague, Ms Hanson also falsely claimed he assaulted One Nation chief of staff James Ashby without provocation in Parliament House, Justice Robert Bromwich said at the time.
But the findings and damages were thrown out by the full court on Wednesday after a successful appeal by Ms Hanson.
Mr Burston was also ordered to pay the One Nation leader's legal costs for the defamation case and appeal.
In his earlier judgment, Justice Bromwich was scathing towards Mr Burston's general behaviour, calling it "objectively wrong and inappropriate".
The ex-senator's conduct included telling one female staffer, "You probably just need a good f***."
During the seven-day defamation trial, the court heard Mr Burston cupped the face of another staffer before giving her a "long, hard kiss" and shoved $100 between her breasts on a separate occasion.
Ms Hanson filed a counter-suit in the Federal Court in November 2020 claiming Mr Burston's defamation case and sexual harassment allegations against her amounted to discrimination.
That case is still ongoing.
