Liz Cosson will wrap up her leadership of the Department of Veterans' Affairs in January next year and be replaced by Alison Frame.
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The Prime Minister said the handover timing - four months before Cosson's five-year term was due to end - would ensure continuity through next year's budget process, ANZAC commemorations and the department's response to a royal commission.
The defence and veteran suicide royal commission is due to report by 15 June. An interim report made "urgent" recommendations regarding the department's claims processing to bring down wait times as long as 300 days for some veterans.
Ms Cosson told the most recent estimates hearings that progress on those recommendations has been made after the department's staffing cap was lifted earlier this year. There was still a big backlog of veterans' claims to be processed, but it was "starting to go down", she said.
Prime Minister Anthony Albanese thanked Ms Cosson for her service leading the department.
"She has been a passionate advocate for improving services for veterans and their families," he said.
Ms Cosson said she felt honoured and proud to have led DVA through the large transformation of its services to veterans and veterans' families, as it worked hard to make big improvements in the ease of access for veterans to gain assistance and support.
She said she was particularly proud of the expansion of the mental health services and support and the shift in focus to not just treatment but overall wellbeing of veterans throughout their lives.
That work would continue in 2023, she said.
"I know there are some veterans and families out there who are waiting too long to see their claims processed and I am truly sorry for that delay," she said.
"But know that the government and department are working hard to eliminate that backlog as quickly as possible."
Ms Cosson paid tribute to and thanked the DVA staff for their ongoing commitment to the veteran community, describing them as capable and committed and "some of the most dedicated and caring individuals I have ever had the privilege to work with."
Ms Cosson and the Prime Minister also congratulated Ms Frame on her appointment.
"Alison Frame is an experienced and capable leader who is very well placed to further advance the work of the department," Ms Cosson said.
Ms Frame, who currently works in the Prime Minister's department as the deputy secretary for social policy, will commence her five-year term as the new DVA secretary on January 23.
The Prime Minister said Ms Frame's experience as a senior public servant in the Commonwealth and NSW government in both service delivery and policy roles brings "significant experience working with stakeholders and leading staff to deliver positive outcomes for the community".
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Before joining PM&C, Ms Frame worked in NSW departments of planning and environment, premier and cabinet, and family and community services. She also worked as a senior executive for the Commonwealth's service delivery agency Centrelink.
The previous coalition government last year launched the veterans suicide royal commission after a long campaign by families and supporters of veterans.
The commission handed down its first interim report in August recommending urgent action on the DVA claims processing backlog.
Veterans' Affairs Minister Matt Keogh later apologised in the parliament to the nation's veterans for successive government's failing them. Australia's veteran suicide rate remained a national tragedy, he said.
"It is clear the things are not right. On behalf of the Australian government, I say sorry."
Support is available for those who may be distressed. Phone Lifeline 13 11 14; Mensline 1300 789 978; Kids Helpline 1800 551 800; beyondblue 1300 224 636; 1800-RESPECT 1800 737 732.
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