Controversial army trials of anti-malarial drugs were conducted ethically, with soldiers advised of potential side effects risk and not coerced into participating, Defence's inspector-general has found.
But veterans say these findings from an internal inquiry were predictable and disappointing and there should be an independent inquiry.
The inspector-general's inquiry was prompted by complaints from Major Stuart McCarthy who suffers from a serious neuropsychiatric illness, which he blames on taking the anti-malarial drug mefloquine during overseas defence deployments.
He claimed the two trials, involving troops heading to East Timor, were unethical, with soldiers compelled to participate without being fully advised of potential risks. He also said he'd been threatened with disciplinary action for speaking out.
In the report, acting Inspector-General Brigadier James Gaynor found the trials were conducted ethically and in compliance with guidelines.
Trials were voluntary, with participants provided with information about side effects "consistent with relevant product and consumer medicine information available at the time."
Soldiers were warned of two potentially rare but serious side effects from the drug mefloquine - anxiety and depression - but not the possibility of seizures, the report says.
When Australian troops deployed to East Timor in 1999, 64 soldiers came down with malaria in the first five months. One cause was soldiers not taking the standard preventive medication doxycycline each day.
Between 2000 and 2002, the Army Malaria Institute conducted two trials, the first involving 759 personnel to assess a new drug tafenoquine, with mefloquine as a control. A quarter took mefloquine. Both mefloquine and tafenoquine require just one tablet a week.
The second trial tested mefloquine against doxycycline. 1157 soldiers took mefloquine. Three serious "adverse neuropsychiatric events" were reported, two in soldiers with undisclosed medical conditions.
Mr McCarthy, now spokesman for the Australian Quinoline Veterans and Families Association said during the trials many soldiers under-reported or failed to report side-effects as they wanted to stay on the operation and not let down their mates.
"Luckily, the majority of these personnel appear to have had no lasting impacts. For others, the side-effects experienced tapered off, but crucially, for a sizeable minority their mental health and life has never been the same," he said in a statement.
Defence continues to use mefloquine, but only if doxycycline and tafenoquine are unsuitable. Defence's website warns less than one per cent of users may experience symptoms including hallucinations, aggression, psychosis and suicidal ideation. In some people, the effect may be permanent.
Veterans Affairs Minister Dan Tehan said his department had established a dedicated mefloquine support team to help current and former defence personnel with mefloquine related claims.
"As part of the claims process, DVA can arrange an appointment with an appropriate medical practitioner and meet the costs of any required medical report," he said in a statement.