"Offensive" material about West Papua at a Special Forces base is what prompted Indonesia's defence chief to cut military cooperation with Australia.
The ABC has confirmed an Indonesian officer had complained about the "insulting" training posters at the SAS headquarters in Perth in November last year, prompting Australian Defence leaders to launch furious efforts to try to smooth relations with their counterparts in Jakarta.
An Indonesian military spokesman said cooperation between Indonesia and the Australian Defence Force (ADF) had been suspended, effective immediately.
Indonesian Special Forces group Kopassus trains with the Special Air Service at the unit's Campbell Barracks in Perth.
Major General Wuryanto would not confirm the reason for the suspension, saying it was for technical matters, and that there were "ups and downs in every cooperation between two national forces".
Sources familiar with the incident confirmed to the ABC the "laminated material" concerned West Papua, an Indonesian province that has tried to seek independence.
It was unclear how long the suspension was for or whether it would affect the countries' future joint training exercises.
The Indonesian and Australian navies were due to participate in multinational training exercises in February.
A spokesman for the Indonesian Navy said he had just found out about the military chief's "statement about the suspension of cooperation with Australia".
"Whether or not we will continue with the joint exercise, I will have to get back to you on that," First Admiral Jonias Mozes Sipasulta said.
"I need to build more details first. Usually we don't suspend cooperation on education and training but now I heard we've suspended all cooperation."
Australian minister seeks to mend relations
Australian Defence Minister Marise Payne confirmed that the complaints concerned "some teaching materials and remarks" at an army language training facility in Australia, and that some military cooperation with Indonesia was now on hold.
Senator Payne said the concerns were raised in November, though she first addressed the issue of suspended defence cooperation with her Indonesian counterpart this week.
"Indonesia has informed Australia that defence cooperation would be suspended," Senator Payne said in a statement.
"As a result, some interaction between the two Defence organisations has been postponed until the matter is resolved. Cooperation in other areas is continuing."
"We have been communicating with our counterparts at the appropriate level to manage this process," she said.
No timeframe has been provided for an expected resumption of cooperation and Senator Payne could not confirm whether joint exercises between the Australian and Indonesian navies would go ahead next month.
In a separate statement, the Defence Minister said Australia was committed "to building a strong Defence relationship with Indonesia" and would "work with Indonesia to restore full cooperation as soon as possible".
Indonesia feared Australia would recruit its best soldiers
In a speech from late November, Indonesia's military chief General Gatot Nurmantyo said he had earlier stopped the training program in Australia.
"Every time there is a training programme - like recently - the best five or 10 students would be sent to Australia. That happened before I was chief so I let that happen," he said.
"Once I became chief commander of the national forces, it did not happen again. They will certainly be recruited. They will certainly be recruited."
Australian defence chief wrote to Indonesia about material
The ABC has learned that on November 23 last year, ADF chief Air Chief Marshal Mark Binskin wrote to his Indonesian counterpart about the offending material.
A diplomatic source familiar with the correspondence said the Defence chief's letter reassured the Indonesian military that the offensive material displayed in Perth did not reflect the view of Australia's Defence Force, and was an isolated incident.
Australia's Chief of Army Lieutenant General Angus Campbell also wrote to his Indonesian counterpart on November 24 to reassure him that Australia did not endorse the material.
The Defence Force had yet to respond to questions, but senior figures expressed surprise at the comments from Indonesia's military.
Military cooperation between the two nations was last suspended in 2013 over a phone-tapping scandal.
Documents obtained by the ABC and Guardian Australia revealed that in 2009, Australian intelligence attempted to tap the mobile phone of then-president Susilo Bambang Yudhoyono.