The NSW RSL has been warned it will "find itself a thing of the past" if it does not respond to a powerful new inquiry into alleged embezzlement and fraud within the 100-year-old institution.
The state government on Monday announced RSL NSW, RSL LifeCare and the RSL Welfare and Benevolent Institution (DefenceCare) will be the subject of the wide-ranging investigation.
The inquiry will have royal commission-like "special powers" such as the ability to subpoena evidence and compel witnesses to give evidence.
It will be headed by retired Supreme Court judge Patricia Bergin.
"This is probably the darkest day in the history of the RSL," NSW Veterans' Affairs Minister David Elliot told reporters.
The NSW branch has been plagued by a series of financial scandals and fraud allegations in recent months, with several separate inquiries under way by NSW Police and Australia's charities watchdog.
"The fact that I've seen the allegations of hundreds of thousands of dollars misappropriated has meant that I'm fed up, and I know that the rank-and-file members are fed up," Mr Elliot said on Monday.
The future of the branch will depend on the investigation, he says.
"I'm appealing to all those that have been involved in this matter to be honest, open and forefront.
"The RSL, if this matter isn't dealt with properly, may find itself a thing of the past."
The state government in December referred former NSW RSL president Don Rowe to police over claims he used his corporate credit card to withdraw $200,000 in cash.
Mr Elliott made the referral after reviewing a damning interim report into claims senior figures at the NSW branch were stockpiling millions of dollars in consultancy payments instead of spending it on veterans.
Better Regulation Minister Matt Kean said the inquiry's terms of reference had been made "deliberately broad".
"We want to investigate the directors' activities in this, and people associated with fundraising activity," he said.
"The RSL should be directing its fundraising activities to supporting the veterans that it's there to serve, not lining the pockets of individuals that have allegedly conducted these activities."
Mr Elliot has meanwhile urged NSW residents to continue to support the veterans and RSL sub-branches in their area "because the work of a few should not be used to denigrate this wonderful institution that we've relied on for so long".
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