The federal government is being urged to claim HMAS Perth as a war grave amid reports scrap merchants are stripping the historic wreck, which may still contain the remains of Australian sailors.
The ship was carrying 686 people when it was sunk in the Sunda Strait between Sumatra and Java by Japanese torpedoes in 1942 and at least 355 Australians went down with it.
Professional diver Sam Collett told the ABC he last visited the wreck in September and saw signs it was being stripped for salvage.
"Compared to previous trips I had made, the extent of commercial-scale salvaging was immediately obvious," he told the ABC.
The ABC says an official report about the situation was lodged with the Department of Defence in October suggesting there was a strong possibility human remains were within sections of the ship and that they risked being disturbed.
"It (the report) warned action must be urgently taken to prevent further mass salvaging," the ABC says.
Gavin Campbell, 92, the last surviving officer of HMAS Perth, said news of the salvage was "appalling".
"The remains of the crew are still there and should be treated as a war grave ... If the navy and the government have been aware of it, shame on them for not taking action to stop it," he told the ABC.
The wreck is not protected as an official war grave, with Australia and Indonesia yet to ratify the UNESCO Convention on the Protection of Underwater Cultural Heritage, a binding national treaty that would oblige both countries to protect such sites.
Pattie Wright, who wrote a biography of one of the warship's more famous survivors, Ray Parkin, is an advocate for the protection of the wreck.
"Canberra needs to claim this ship as a war grave," she told the ABC.
Comment was being sought from the Department of Defence.
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