Palace chairman Simon Jordan has refused to pay £125,000 - roughly 5% of the deal - to the Australian international's management company SFX.
Speaking to The Sun, Jordan said: "We offered Tim a decent Premiership salary and he seemed very keen to join us. The agent then asked for 5% on top - about £125,000.
"I told him he doesn't work for me but for the player, and to take the money out of his wages."
But Sam Rush, chief operating officer of SFX, claimed: "The terms of the deal did not appeal to the player."
Cahill himself is rumoured to be unhappy with the proposed move and does not appear to wish to anger the Millwall faithful by moving to one of their fiercest rivals. The player has stated before that he'd like to stay with The Lions and help them into the Premiership.