Maria Mathews had split with her husband Philip Mathews and began a new relationship with Malcolm Woods, a man she met while working on the HMAS Manoora and who had also split with his wife.

But the trio failed to tell the Defence Force about the breakdowns of their marriages and continued receiving entitlements connected to the now finished relationships, such as rent assistance and food allowance, for more than two years.

Between 2010 and 2012, Maria Mathews dishonestly claimed, for example, more than $22,000 for an apartment in Pyrmont, Sydney, and Woods more than $27,000 for an apartment in Kings Cross, Sydney.

“There’s a real story behind all this,” a barrister for the trio, Jack Pappas, said at a sentence hearing in the ACT Supreme Court on Thursday.

What started as a little lie grew over time, he added.

They began by claiming legitimate entitlements.

Maria Mathews and Philip Mathews married in January 1999. Maria was a cook in the navy, and her husband worked as a clearance diver. In 2007, the couple, both holding the rank of Leading Seaman, were posted to Royal Australian Navy units in Darwin.

Two years later, Maria Mathews was posted to HMAS Manoora in Sydney.

Mr Pappas described their marriage as in a state of flux and argued it was not necessarily clear cut as to when they were legally obliged to alert the authorities.

While posted to Sydney, Maria Mathews started a new relationship with a senior officer, Woods, who was directly above her in the chain of command. Woods' marriage had also recently ended.

But while they had started by claiming legitimate entitlements, all three failed to tell the defence force about their marital breakdowns.

Maria Mathews and Malcolm Woods also made denials when questioned about the existence of an inappropriate relationship between them, court documents said.

Largely, the money they had claimed was for rent assistance, but also included remote location and reunion travel and food allowances.

The three, who remain friends, have pleaded guilty to a single charge each of dishonestly obtaining a financial advantage by deception.

Mr Pappas told the court all three had been well regarded and were high achievers during their service to the country.

Woods, 49, was a talented cook and had achieved the senior rank of Chief Petty Officer, Mr Pappas said, and had worked as the personal chef to the head of the navy.

He had served in the navy for some 25 years.

He was now working 16-hour days in the kitchen he ran in a local café with Maria Mathews in a remote region of Western Australia.

Mr Pappas said Woods and Maria Mathews, 53, now worked within the local Indigenous community and intended to live out their days in the remote location.

He told the court Maria Mathews had served a tour of duty in a Middle East war zone, and had received citations for outstanding service in the navy.

She was painfully aware that her achievements had been greatly diminished by her subsequent behaviour, Mr Pappas said.

Philip Mathews, 54, was now living with his new partner in the Northern Territory and working as a fly-in fly-out machine operator on Groote Eylandt, the court heard.

He had served in the defence force for 23 years, and received several service medals and a humanitarian medal for his work in Sumatra.

Mr Pappas said the trio had since repaid what they had defrauded.

He noted it had been four years between when the investigation started and when it was referred to prosecutors.

The trio were not driven by greed, the barrister said, the money was not for the purchase of luxuries.

He accepted that a sentence of imprisonment was called for, but invited the judge to wholly suspend it.

Federal prosecutors said only immediate full-time imprisonment was warranted in the circumstances.

It had not been an active fraud, they said, but they had hidden from authorities the change in their circumstances.

Justice Chrissa Loukas-Karlsson said she would sentence them in February.