Two officers attempted to pull the driver from the car, but he continued to resist and was verbally abusive.
The dog handler then commanded his dog to bite the driver and pull him from the car. The driver received puncture wounds to his arm, facial grazing, scratches and bruising.
Judge Doherty said "using a police dog was an overreaction".
"In this case, the driver had been pulled over for a driving offence and did not pose a threat to the public with the car immobilised and surrounded. He was being physically resistant and verbally aggressive but sufficient officers were present to deal with him and the two passengers.
"Other tactical options, such as continued negotiation or pepper spray, were preferable to using a dog capable of inflicting serious injuries.''
The authority's report said two passengers were also arrested after they shouted abuse and gang slogans. One passenger spat at police, while another got out of the car and confronted officers.
Acting Southern District Commander Mike Bowman said the officer involved had pleaded guilty to a charge of injuring by an unlawful act.
"Any officer whose actions are potentially criminal will be thoroughly investigated and held to account.''
While the authority had completed its investigation into this incident in July 2021, it delayed the report's release until after the conclusion of related court proceedings.
Bowman said an ongoing employment investigation prevented any further comment at this time.
This story originally contained an image of a police dog and handler. It was a file image and neither the dog or the officer was involved in the IPCA case. We regret the confusion this may have caused.