The demands of treating mentally ill veterans are so challenging and the work so poorly paid, there is a chronic shortage of psychiatrists for those with serious psychiatric injuries, a royal commission has been told.

Geoff Lazar, a lawyer with the NSW Legal Aid Veteran's Advocacy Service, told the Royal Commission in Defence and Veteran Suicide that psychiatrists were already carrying large work loads and were "flat-out".

The added complexities of having to deal with the legal requirements of the Department of Veteran's Affairs made them deeply reluctant to take on veterans.

"A lot of psychiatrists won't do DVA work," Mr Lazar said.

"It's too complex, there are too many forms, and it doesn't pay very much.

"We are finding a real issue of that particularly in regional areas, and even more so in small country towns."

Psychiatric assessments of patients were also often challenged by the DVA if reports were not deemed to have met the "unique standard of proof" required in the jurisdiction.

Mr Lazar said the DVA's in-house medical advisors, even though they were not qualified psychiatrists, would often challenge a diagnosis by a veteran's treating psychiatrist.

"Even if it is supported by documentation from a psychiatrist, the internal doctors look at it and say, for instance, 'No, this is not PTSD, this is anxiety', or adjustment disorder or some other mental health issue'," Mr Lazar said.

He said instead of arguing about how to characterise a mental health condition, there should be a simple broad category for "mental health condition".

"We don't need to argue about how many angels can dance on the head of a pin."

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