An SAS trooper fears veterans will be mentally crushed if federal parliament passes laws to allow the government to release their personal information.
The case of special forces soldier Evan Donaldson gained national attention last year when independent senator Jacqui Lambie used parliamentary privilege to accuse Defence of illegally stripping him of his rank, wages and career following an alleged assault during a secret training exercise.
Trooper Donaldson maintains Defence subjected his case to a cover-up and a misinformation campaign to discredit him over the past 7.5 years.
Last week, he received an offer of settlement for $1 million compensation and his legal costs, which are approaching $850,000. The agreement also recognises his service.
However, on Tuesday afternoon the department contacted him to say he will have to pay his legal costs up front and then will be reimbursed later.
"It almost killed us, getting to this point - the abuse of power by the department," Trooper Donaldson told AAP, sitting next to his wife Phoebe.
"If that happened to us and we survived it, how many people have been crushed?"
Last week, a bill cleared parliament's lower house with the support of Labor, which gives the Department of Veterans Affairs' secretary the power to disclose otherwise protected information about an individual.
The government argues the measure is necessary to correct the public record.
Labor is now rethinking its support after the opposition referred Human Services Minister Alan Tudge to federal police to determine whether providing a journalist with a welfare recipient's personal information was legal.
Trooper Donaldson, who served in Iraq, Afghanistan, East Timor and the Solomon Islands, said the second part of bill was "designed to silence anyone who speaks out against maladministration".
"I've felt betrayed," the father-of-one said.
"The greatest threat to my life was my own government. Without a doubt."
The South Lake Macquarie RSL sub-branch has a petition on change.org, signed by almost 3000 people urging senators to block the legislation.
The sub-branch is concerned that no independent privacy impact assessment has been carried out.
In a submission to a Senate inquiry into the bill, the Commonwealth Ombudsman expressed concern that the release of an individual's personal information "has the potential to adversely affect veterans and ex-service personnel, particularly those who are already vulnerable".
Comment has been sought from Defence Minister Marise Payne and Veterans Affairs Minister Dan Tehan.
The Defence Force Welfare Association has called on the government to release a privacy assessment carried out by the Attorney-General's Department.
It also wants an independent assessment, which it believes will help engender confidence among veterans.
"(It) will go a long way to achieving trust within the veterans community on this matter by addressing any shortcomings in protecting privacy," executive director Alf Jaugietis said in a statement on Tuesday.
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