That ruling came after a lengthy trial in which Mr Roberts-Smith sued three newspapers – the Sydney Morning Herald, The Age and the Canberra Times – and two journalists, over stories reporting allegations he committed war crimes while deployed in Afghanistan while serving.
Last June, Justice Anthony Besanko dismissed the case.
Mr Roberts-Smith, who is appealing that verdict, maintains his innocence and has not been criminally charged.
Mr Albanese has told Channel Nine it would be wrong for the government to get involved.
"Well, this isn't a decision of the government, this was a decision of the palace to give all VC recipients a further award," he said.
"There's ongoing legal action potentially on these issues, so given the government's engagement, it's important that there not be interference in that.
"But it certainly wasn't a government decision."
In statements to the ABC, spokes for the Australian governor-general and the WA government said they also had no role in determining the recipients of the honour, while WA's Government House declined to comment.
It is not known if WA Governor Chris Dawson was personally involved in the event at Government House.
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