A top UN human rights official criticised the nation's "brutal security operation" against the Rohingya population earlier this month.
But an Australian Department of Defence spokesperson said it was working with the Myanmar military to "promote professionalism and adherence to international laws".
"It is therefore important we maintain appropriate lines of communication with the Myanmar military to do this," the spokesperson said.
"For this reason, our modest defence engagement with the Tatmadaw [Myanmar military] will continue, however we will review current and planned defence activities on a case-by-case basis."
Phil Robertson, deputy Asia director of Human Rights Watch (HRW), criticised Australia's military cooperation with Myanmar, formerly known as Burma.
"That's an absolutely appalling response to what is clearly now crimes against humanity that are being committed by the Burma army against the Rohingya," Mr Robertson said.
"Frankly, it shows the total abandonment of human rights as a core part of Australian foreign policy."
The Rohingya are one of the world's most persecuted peoples, according to the United Nations, and hold no civil or political rights in Myanmar.
Last week the United Kingdom suspended its own military assistance to the Southeast Asian nation.
"We are very concerned about what's happening to the Rohingya people in Burma … the military action against them must stop," British Prime Minister Teresa May said.
"The British Government is announcing today that we are going to stop all defence engagement and training of the Burmese military by the Ministry of Defence until this issue is resolved."
Australia could play 'honest broker', expert says
But the head of the Strategic and Defence Studies Centre at ANU, John Blaxland, said ongoing engagement was the only way Australia would be able to positively change the situation in Myanmar.
"Cutting off those ties is like cutting off your nose to spite your face," he said.
"It's actually unhelpful because this is the only venue for engagement with the Burmese military on issues relating to human rights."
After decades of junta-led oppression, Australia restarted military relations with Myanmar's military in 2013.
Professor Blaxland, who served as Australia's defence attache in Thailand, said Australia could play the role of "honest broker" between Myanmar and the southeast Asian nations most likely to exert influence, especially Muslim-majority Indonesia and Buddhist-majority Thailand.
"No, I don't think we should cut [military engagement] off, it's very important that Australia keep the door open," he said.
But Mr Robertson disagreed, arguing Australia could not in good conscience continue military training.
"This is literally whistling past the graveyard. Does engagement mean you get your hands bloody? Yeah, so time to think again," Mr Robertson said.
Genocidal soldiers or future UN peacekeepers?
One of the most recent Australian training programs was a 10-day "United Nations Peacekeeping Training Course" that ended on August 18.
A week later, Rohingya insurgents attacked 30 police posts in northern Rakhine state, sparking the retaliation from the security forces and the subsequent exodus of Rohingyas.
The army said about 500 people have been killed — at least 400 of them alleged insurgents — but human rights organisations report hundreds of civilians have been killed and 214 Muslim villages systematically burnt to the ground.
The UN special rapporteur on the prevention of genocide told the ABC the violence in Myanmar appeared to involve crimes against humanity, and could possible meet the strict legal definition of 'genocide'.
Myanmar is not Australia's only controversial defence cooperation program in the region.
In 2014-15, Australia spent $2.5 million working with Thailand's military, which overthrew the democratically-elected government three years ago.