In the episode, after a night of several transgressions, the contestants learn they've managed to drain the $200,000 prize fund to zero.
The music on the montage of their activities is the Last Post – a bugle call used across the commonwealth to signify a final farewell at Anzac Day and Remembrance Day services, as well as military funerals.
The show's narrator – comedian Desiree Burch – then says: "I think we all need to take a moment and pay our respects to our dearly departed prize fund.
"A once healthy $200k has been reduced to nothing but sweet memories.
"Dear prize fund, your dollars may have gone but you will never be forgotten."
RSL NSW President Ray James told 7NEWS.com.au he was "outraged that the Last Post has been used in this context".
"This piece of music is used as a mark of respect to those that have lost their lives in wars and conflicts around the world.
"The producers have shown a complete lack of empathy for their service and sacrifices made for their country, and for their loved ones left behind."
The scene has also been labelled as "inappropriate" and "disrespectful" online.
"I can't believe they used it AS A JOKE. it's so disrespectful," one person wrote.
"So glad someone else clocked this! Netflix should be embarrassed at the blatant disrespect!" said another.
News.com.au has contacted Netflix for comment.