Wassim Tiriaki was found guilty by a jury in May 2014 of murdering Matthew Hedges in his Chester Hill, Sydney, home on the final day of 2011.
Mr Hedges was shot once in the chest at close range with a Magnum revolver through his lounge room window.
Salim Tabbah was found guilty of manslaughter.
Tiriaki was sentenced to at least 20 years jail for murder, Tabbah to at least 10 years for manslaughter.
Tabbah then confessed to being the shooter in 2021, signing a sworn statement after previously telling a solicitor, a prison chaplain and a psychologist in the preceding five years.
He was months away from being eligible for parole.
Tabbah's Islamic faith, the injustice to the Hedges' family, Tiriaki's wrongful conviction, and a desire to start a fresh, honest life inspired his confession, he said.
He maintained Tiriaki did not know he had a gun.
Tiriaki appealed his sentence on the grounds there had been a miscarriage of justice and Tabbah gave evidence in support.
The appeal considered whether Tabbah's confession was fresh evidence (and whether it was credible), and whether Tiriaki would have been acquitted of murder at trial if the evidence had been given then.
The Court of Criminal Appeal unanimously quashed his murder conviction and ordered a new trial on Wednesday.Â
His evidence was ruled to be fresh, because although he could have given it at trial, Tiriaki's preparations to defend his case could not have anticipated Tabbah would admit shooting Mr Hedges.
Tabbah gave deliberately false evidence during trial, appealed against the severity of his manslaughter sentence, and his account had some inconsistencies, which all detracted from the reliability of his fresh evidence.
However, his violent criminal history, intermittent explosive disorder and post-traumatic stress disorder supported his version of events, the court found.
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