Victorian soldier Private Jason Challis, 25, died after he was shot in 2017 at the Australian Defence Force's Mount Bundey training area, about 120km southeast of Darwin.

The department pleaded guilty in the Northern Territory Local Court on Tuesday to failing to comply with its health and safety duty to Pte Challis.

Defence's lawyer Fiona McLeod SC said it was recognition of "the vulnerabilities of the processes of army and the fact that Private Challis was not protected while in service as he was entitled to expect".

"(This) was a terrible and avoidable tragedy and one that should never have occurred and is deeply regretted," she said.

"Defence recognises the profound impact his death has had on his family, his friends, including members involved in the incident and ADF members generally.

"The lessons learned from this incident have already and will continue to make a difference to ensuring soldiers are safer in the future."

The much-loved soldier was shot in the head and knee during an urban operation exercise called Tigers Run in a mock town.

He and three other members of a four-soldier team approached a wood and hessian building to engage mock targets.

Two other members of his team entered it and fired from within the building at a target that Pte Challis was crouching behind at the rear of the building.

"His head wound was immediately non-survivable," prosecutor Jennifer Single SC said.

"He died several hours later in Darwin hospital but it was immediately non-survivable."

The team was supposed to have moved as one to prevent the soldiers from firing on one another.

It is not known why he became separated despite investigations by the NT coroner, the ADF and the NSW police forensics unit.

"What is clear is that Private Challis did not move with the rest of the (group) to the front of the building," Ms Single said.

"When you hear stop, stop, stop that's when they find Private Challis," she said in reference to a video of the exercise played to the court.

Pte Challis's mother, Helen Brandich, told the court she had tried to stay strong but the matter had "taken way too long to be finalised".

"I cry behind closed doors," she said in her victim impact statement read to the court.

"The last four years have been the hardest years of my and my family's life.

"Before my son was killed he was the life of the party. Now he is just a memory.

"His death has sucked the life out of all us and left a huge hole in our hearts."

Pte Challis's father, John Challis, told the court his son was a "true Aussie digger", labelling his death a "tragic f*** up"."

"Jason died serving his country, he may not have been at war or in Afghanistan but he had his whole heart in this and he died doing something he absolutely loved," he said.

"Not many people can say that."

Defence was facing three counts of failing to comply with health and safety duty after an investigation by the work, health and safety regulator Comcare.

But two charges were dropped and one amended.

The maximum penalty is $1.5 million.

The case continues.

Australian Associated Press