The escort escaped unharmed but three police were hurt in the firefight, although their injuries were not life-threatening.
Meanwhile the police are still investigating IS's claims of the terror attack and are also trying to find out whether Khayre acted alone or had accomplices. The police's confirmation came after ISIS took responsibility for the incident that took place in an apartment in Brighton on Sunday evening.
Khayre had been on parole since late previous year and had a long record of serious criminal offending including offences for drugs, firearms and violence and was being investigated for possible links to terrorism.
"Nothing we have found thus far suggests to us this was anything that was planned or done in concert with others", he said. Chief of staff Nicole Bland, who took the call, said she could hear a woman screaming in the background as the man declared "This is for IS".
After negotiations failed, the man emerged and began shooting at police, injuring three officers before he was shot dead.
At 6pm, he left the building and fired at police, wounding three of them before they gunned him down.
Attacker shot outside Notre-Dame cathedral in Paris
President Emmanuel Macron has announced he will create a special task force to better coordinate the fight against terrorism. Government spokesman Christophe Castaner said the man had "never showed any sign of radicalisation" before the attack.
Prime Minister Malcolm Turnbull said there were "very grave questions" about how Khayre got parole despite his violent, criminal history. The gunman was acquitted in an investigation of a terrorism plot in New South Wales several years ago, but since then he was involved in "more general criminal offending", Mr Ashton said.
"We believe that calls (were) made by the individual inside the apartment", Ashton said.
The Victorian Supreme Court was told during that case that Khayre had been a worshipper at a Melbourne mosque and at a nearby prayer hall regarded by police as an "incubator" of extremist ideology.
"The board received absolutely no information from either Corrections or external services which would cause us to have any concerns about risk to the public".
Police were called to the scene after emergency calls reported loud bangs or explosions, Victoria Police Deputy Commissioner Andrew Crisp said Monday, which were later confirmed to be a shotgun blast.
Australia passed laws past year allowing the indefinite detention of anyone convicted of terror-related offences if authorities believed that person posed a threat after their release.
The siege has ignited debate about local parole laws after it emerged Khayre had a history of violence and was released from jail past year following an aggravated burglary.