The Department of Defence has poached a senior officer from the Australian Tax Department to fill its CIO seat that has been empty for more than six months.

The appointment of ATO second commissioner Greg Farr will fill the seat of former CIO air vice-marshal John Monaghan, kept warm through his absence by IT head Peter Lambert.

"We are delighted to welcome Mr Farr to the Defence Organisation and look forward to working with him on what is an increasingly vital part of our activities including in support of ADF operations," Defence secretary Nick Warner said.

Farr will assume the role next month in which he will be required to take charge of a complete overhaul of the department's IT systems which is one of the most complex in the country.

The appointment signals the end of a gruelling search for a new CIO, which forced the department to make the position available to public servants and the private sector, and compete against $1 million-plus remuneration packages offered widely in the IT industry.

A Defence spokesperson said an executive recruitment company was appointed to source a new CIO from government and private sectors.

Farr is in charge of the ATO's production management areas covering data processing, and oversaw reform to ICT operations.

Meanwhile, the department's troubled Oracle HR and payroll system is set for a $100 million upgrade by next year which will see Oracle and rival SAP competing for the deal at the end of this year.

According to the Australian National Audit Office (ANAO) the project exceeded its budget by $26 million and was three years late.

The total cost to defence to bring PMKeyS into service, including the production support costs during the roll-out period was estimated to be at least $131 million, which has exceeded the department's 1998 estimate of $103.5 million.