An internal army risk assessment found a fault in night vision helmets called TopOwl as well as errors caused by a software upgrade could lead to a catastrophic incident.
The assessment was made four years before the tragic crash that claimed the lives of four air crew in an MRH-90 Taipan helicopter crash off Lindeman Island.
Lieutenant Colonel Brendan Reinhardt said the assessment found there was "unacceptable ambiguity" that meant when a pilot looked away from the helicopter front windscreen or the axis at night or in difficult terrain conditions, it could lead to a crash.
This is because there was a fault in the helmet alongside the errors in symbology caused by a software upgrade.
"The people piloting the aircraft, believe they have control of it, but are unaware of where the earth is, or where the aircraft is going, and the aircraft flies into the ground or water," Lt Reinhardt told the inquiry.
"There is not a problem or a malfunction with the aircraft."
He said army aviation was "dissatisfied" with the assessment's findings and wanted the software upgrade to be rolled out but he called for further analysis.
"Someone within army aviation ... took the view that this should go ahead, as it's already been paid for," he said.
"It was a very uncomfortable situation."
Further testing was carried out that found the issues with the helmet were "undesirable" but suggested it was compliant.
Lt Reinhardt did not agree with the further assessment, telling the inquiry the ambiguity of the system issue was still unacceptable.
He continued to raise the alarm over safety concerns with army aviation but the software upgrade and fault were rolled into service in 2020, the inquiry was told.
"(Army aviation) considered that pilots would always look to the front when they reset their attitude information, and did not share my concern," Lt Reinhardt saidÂ
"So from an operational point of view, they were happy."
The inquiry has been told extensively of the concerns over fatigue on crew performance and Lt Reinhardt said it was an added risk when pilots were flying tired with faulty helmet software.
He gave the example of a tired pilot flying in the rain at night trying to turn a helicopter around before they get startled by terrain and realise they cannot do it.
The pilot will then overcorrect to avoid flying into the ground or cloud.
"When people are startled they operate the controls of the machine they are at instinctively, and they over correct, and it becomes a fear response," Lt Reinhardt said.
Captain Danniel Lyon, Lieutenant Maxwell Nugent, Warrant Officer Class Two Joseph Laycock and Corporal Alexander Naggs died in the July 2023 crash.
The inquiry continues.
