Australian authorities have compensated a Darwin man $100,000 after they wrongly accused him of trying to smuggle drugs into the country in bottles of shampoo.

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Neil Parry was wrongly accused of smuggling drugs and spent three days in jail. ((ABC TV))

Neil Parry spent three days in jail last year after he was arrested at Darwin Airport and accused of trafficking liquid ecstasy. His boat and two of his friends houses were also searched.

But it turned out that his two bottles of Pantene Pro-V shampoo and conditioner were exactly what the label said.

Australian Customs and Border Protection said in a statement Monday that there were "mistakes made during the presumptive testing of Mr. Parry's goods" and that they have now introduced additional procedures when conducting drugs tests.