But other lawyers have said Mr Bain, who spent 13 years in jail, faces a big hurdle to win compensation. In the past it has been awarded only if someone was believed to be innocent on the balance of probability, rather than simply found not guilty.
Justice Minister Simon Power confirmed last night he had received a letter from Mr Bain's lawyers formally notifying him of the claim.
Mr Bain was convicted in 1995 of murdering his parents, Robin and Margaret, two sisters Laniet and Arawa and brother Stephen in their Dunedin home.
In 2007 the Privy Council quashed his convictions on the grounds of a substantial miscarriage of justice and ordered a retrial. In June last year he was found not guilty at the retrial, after his defence team had argued that his father, Robin, had shot the other four family members before turning the gun on himself.
"There is a process now to work through and I will not be making any further comment at this time," Mr Power said.
There is no legal right to compensation for wrongful conviction and imprisonment but the Government can, in its discretion, compensate someone by making an ex gratia payment.
Cabinet guidelines contemplate three kinds of compensation:
* Compensation for non-pecuniary losses following conviction -- for example loss of liberty or emotional harm -- based on a starting figure of $100,000 for each year in custody;
* Compensation for pecuniary losses following conviction, for example loss of livelihood and future earnings;
* A public apology or statement of innocence.
The Ministry of Justice initially assesses each claim, and those which merit further assessment are referred to a Queen's Counsel for advice.
The QC reports to the minister on the merits of the claim.
If the QC is satisfied that the applicant is innocent on the balance of probabilities, the QC will recommend an appropriate amount of compensation in line with the guidelines.
Cabinet makes the final decision on the recommendation of the minister.
Asked by NZPA how much compensation was being claimed, Mr Bain's retrial counsel Michael Reed QC said he did not want to add to what Mr Power had said.
"We are seeking dialogue with the minister as to a way forward," Mr Reed said.
An online petition opposing compensation for Mr Bain last night had nearly 1400 signatures.
The petition addressed to Mr Power is organised by the Justice for Robin Bain Group, whose spokesman Kent Parker said he expected more signatures now the application for compensation had gone through to the minister.
When David Bain was acquitted last June, Christchurch barrister Nigel Hampton QC said it was a "high hurdle" to win compensation -- "He has got to prove on the balance of probabilities, more likely than not, that he is completely innocent".
Colin Withnall QC, who was involved in the original Bain appeal, agreed he would not necessarily be compensated -- "Although the Bill of Rights says you're presumed to be innocent until the contrary is proved, when it comes to paying money that presumption somehow doesn't apply".
Early last year the Government rejected Rex Haig's plea for compensation for wrongful conviction and imprisonment.
Mr Haig, who was convicted in 1995 for the murder of Mark Roderique on his fishing boat off the West Coast, had his conviction quashed by the Court of Appeal,
But after a QC's report cast doubt on his innocence, Mr Power declined the compensation application.
David Dougherty received $868,728 after his rape conviction was overturned in 1997.
A High Court jury had found Mr Dougherty guilty of the rape in 1993 and he was jailed for seven years after the girl identified him as her attacker.
He was freed at retrial in 1997 after a jury accepted new DNA evidence that seminal stains in the girl's underwear could not belong to him.
