Prime Minister Anthony Albanese confirmed in March that three Australian navy personnel were on board the American boat when it sank the Iranian frigate.
Mr Albanese at the time said the Australians did not "participate in any offensive action".
Vice Admiral Hammond told an estimates hearing on Wednesday, the claim made by a commentator that Australians were hiding was "insulting" and showed a "complete lack of understanding for what submarines on operations actually do".
"No one is asleep in their bunk when a submarine is involved in activities such as that," he said.
"Their duties were defensive in nature, and they were standing there, their assigned stations alongside their shipmates."
The federal government was initially unwilling to confirm the reports that Australians were on board the US submarine during the attack.
Vice Admiral Hammond also clarified an earlier statement where he said that he was directed by Defence Minister Richard Marles' office to attend and address a lobbyist function in Washington hosted by former Liberal defence minister Christopher Pyne.
He said the price for that dinner was $950 per person, not the $5000 price that was previously suggested.
"It is more accurate to say that my speech at the dinner in Washington DC, was consulted with and approved by the office of deputy prime minister," Vice Admiral Hammond told the hearing.
"I was one of nearly 50 speakers involved in that activity over three days ... the speech was incidental to my presence in Washington DC, not the reason for it."
Earlier, officials were questioned by independent senator Jacqui Lambie about the air force's plan to phase out C-27J Spartan planes just 11 years after the first one landed in Australia, and that a detailed replacement plan was yet to be disclosed.
"You guys don't really actually have a plan, do you? You have no idea," she said.
"It's really embarrassing for me who wore that uniform."
The Spartans are small enough to land on short, soft runways but can carry troops and equipment.
The fleet of 10 aircraft cost Australia about $1.4 billion, with the first plane arriving in early 2015.
Air force chief Air Marshal Stephen Chappell told the ABC in May that circumstances had changed "drastically" since the decision to acquire the C-27Js, such as relationship shifts in the Pacific.
Commercial planes are now "part of the option set" the air force will consider when replacing the Spartans, Air Marshal Chappell said on Wednesday.
"There will not be a capacity gap (during the phase out). How we will fill that capacity will be a combination of C-27s over at least the next couple of years ... and maybe one or more (commercial) option," he said.
