"But the boss on one of the levels is just a scientist. I remember asking my brother, who's this guy? Why is he a scientist and he doesn't have a machine gun like everybody else?" His brother told him about the notorious SS doctor at Auschwitz, Josef Mengele – and Pieper promptly went to his local library and began reading "all the books" he could find.

Soldiers with machine guns were no longer the most terrifying enemy. "The idea that doctors, who take an oath and are meant to be the good guys … in my childish imagination, that seemed the epitome of all evil, real-life mad scientists who did these atrocious things."

Growing up in Melbourne's south-eastern suburbs, Pieper, 32, was later friends with the children and grandchildren of survivors, intensifying his self-professed "obsession" with one of history's darkest periods.

"I've been accused of having the matzo-ball fever by a Jewish friend, but it's just that I've always been haunted by the idea that my friends' parents and grandparents had been through this … abomination. They'd survived this nadir of humanity."

Pieper's debut novel employs an intriguing perspective on the Holocaust as one of its narrative arcs.

The Toymaker, an ambitious story of long-held family secrets and opportunism, is a tale that has been percolating away in Pieper's mind for at least a decade.

Set in contemporary Melbourne, it's the story of Auschwitz survivor Arkady Kulakov and his descendants, specifically his morally bankrupt grandson, Adam, who runs the family toy business. The successful company, Mitty and Sarah, harks back through the generations to Russia, from where Arkady hails from a family of toymakers.

The company was built on the back of the "Sally Doll", a small wooden doll based on the toys Arkady once crudely crafted in secret in Auschwitz, when he was plucked from the labour camp to work as an assistant to one of Mengele's doctors. Arkady made the dolls for the children who were chosen for the unspeakable medical experiments.

Two generations later, Adam, who considers his grandfather a hero, cynically uses the story as the company's marketing spiel. It's a tale Adam likes to tell repeatedly as though his grandfather's heroism can compensate for his own lack of humanity.

Within the first few pages, Adam is revealed as a vapid, privileged man, coasting through life with more money than he can spend and cheating on his wife, Tess, with a Lolita-like nymphet.

A tryst with his teenage lover in the car park of a fast-food restaurant, which Adam foolishly snaps on his mobile phone, is the beginning of his unravelling, which is told in parallel to Arkady's back story. He's not the only family member with dark secrets.

It's difficult to say more as the book's final chapters reveal a shocking twist – after a clever red herring.

But perhaps its boldest moments are the depictions of life – such as it was – inside Auschwitz. Presumably not an easy thing to tackle as a 30-something Goy.

"I was terrified, of course," Pieper says. "Not terrified of doing something that has been done before, but I was definitely petrified of being disrespectful to the victims of the Shoah, the countless dead, and the survivors."

The Toymaker is not, he emphasises, a book about World War II, but about secrets, and lies, a "moral thriller". He also considers it a "love story – well, there's three pages of love story!" and a "horror story".

"It's not a nice thing to write about, the Holocaust, but to pretend otherwise, to back away from the barbarity of it, I think, would be a disservice," he says.

The gulf between his previous books – his 2014 memoir, Feel-Good Hit of the Year, about his bohemian upbringing with pot-smoking parents and subsequent descent into drug addiction, and the follow-up collection of humorous essays, Mistakes Were Made – is, he knows, vast.

Despite some of the focus of the press around his memoir – headlines focusing on one anecdote in particular: "Teen drug dealer sells pot to his parents!" – it was intended as a comedy. "I was pretty much bald-facedly ripping off David Sedaris," he says. "But I did once see it filed under 'misery' at an airport. I didn't know that was a category, or that I'd subscribed to it."

But his long-held obsession, coupled with global political events, compelled him to turn his focus to weightier matters for his first novel, which he describes as the book he'd "always want to write".

"I always envisaged I'd be doing it later in my life, but then I had an incredible opportunity to take time out and do it; this thing that had been in my mind all this time, I could finally exorcise it."

The migrant crisis, both in Europe and at home, was at the forefront of his mind.

"I think in the past couple of decades, we've seen an elision of compassion in Australian society. It's incremental, society doesn't change overnight – but we've seen an elision of just how much we care; a big flashpoint that springs to mind is the Tampa incident. All of a sudden, for no discernible reason, asylum seekers were a huge wedge issue," he says.

"Since then, refugees have been increasingly vilified, and it becomes a wedge issue every election. I think it's very worrying the way that indifference and in some ways cruelty to asylum seekers, has become commodified; it's become a currency that a government can use to get advance in the polls."

Pieper spent several months working on the book in Prague, after he was awarded the inaugural creative resident of the UNESCO City of Literature of Prague last year, an experience that not only allowed him to immerse himself in one of the cities that forms the backstory of his main character, Arkady, who studied medicine there before the war, but also to experience recent European politics first-hand.

"One of the key themes of the book is about how indifference can lead to cruelty, can lead to evil … and every morning I would open the papers and Europe was growing more and more right-wing as was Australia," he says.

Then when he visited Auschwitz, a nationalist mob burnt an effigy of a Hasidic Jew in the town square: "It was all a little bit surreal and a little bit terrifying."

In Prague, he hung up a quote from political theorist Hannah Arendt's 1963 book Eichmann In Jerusalem on his wall, where he wrote.

"She has a quote that 'sheer thoughtlessness can lead to great evil' and it's been a key thing that stuck in my mind from my reading about this my whole life," Pieper says.

He interviewed survivors, seeking advice and anecdotes, small details of life in the camps; most of them read the finished book, although many have since passed away. He worried that writing about something so distant, yet so big, might be akin to stealing from the memories of the survivors, and of the dead.

"But one of the key precepts of survivors is this idea 'never forget'. Never stop talking about it," he says, adding that those he spoke to "were like 'f--k it, if you need to do it, do it. Never forget'."

Some of the novel's dialogue is more or less transcribed directly from some of these conversations; at one point, Arkady, talking about the war, says to Tess, "it was terrible, but look what we've learnt".

It's a philosophy, he says, shared by many survivors. "They were like, 'it's harrowing for us to read, but these things happened'. I don't think anything can be gained from shying away from the truth. And I have tried my hardest not to be exploitative or pornographic in my depictions of the cruelty."

Despite this, Pieper concedes The Toymaker is bleak. "It's all about crossed wires and miscommunication. That's what makes the world turn! But after writing it, editing it, proofs going out and then it coming back, I re-read it and I thought 'whoah, what have I done? It's irredeemably bleak!"

But there's room, of course, for unhappy stories. "And if there's any hope in there, I think it's that people can move past and survive the things that they've been through."

The Toymaker is published by Penguin at $29.99. Liam Pieper is a guest at the Melbourne Writers Festival. The Age is a festival sponsor. mwf.com.au