The Catholic church has joined calls for a national redress scheme for victims of child sexual abuse, with mandatory participation by the institutions concerned, but wants to retain some of its controversial gag orders to prevent victims suing.

In its submission to the royal commission into institutional responses to child sexual abuse, the church also altered its previous position by proposing a cap on financial compensation.

The Truth Justice and Healing Council, which represents the Catholic church in dealings with the royal commission, said the legally binding deeds of release, which many victims of abuse signed in order to get redress under the church’s Towards Healing program, should remain in place to prevent civil litigation against the church.

But the releases should not prevent victims making a second claim under an official national scheme. The submission said that while there are “strong policy arguments” against allowing someone to reopen a claim, “where an individual can show that there was something manifestly inadequate about the process in which they reached their settlement, they ought to be entitled to reopen the matter”.

The deeds of release, some of which contained gag clauses, have been strongly criticised during the royal commission, with the church accused of silencing victims. Joan Isaacs, the first victim to appear in a public hearing into the Catholic church, said she felt she signed her release “under duress”.

Under the submitted proposal any abuse survivor who received a payment and signed a deed of release could access the proposed redress scheme for a second – and perhaps fairer – payment, but could not sue the church, even if they decided not to approach the new scheme.

“A deed of release in a legal sense is about releasing various parties from civil litigation and that’s what they’ve signed,” the council’s chief executive, Francis Sullivan, told Guardian Australia.

“Most people signed deeds of release with legal advice and with knowledge of that. When you talk about an alternative pathway, we’re saying the deeds of release should not be a barrier to people taking that pathway, but clearly the deed of release still holds on matters to do with civil litigation,” he said.

In a 2013 media release the council urged attorney-generals around the country to begin work on a national and uncapped compensation scheme for victims.

“A national compensation scheme, funded by the church and other organisations and with no caps on payments, is an important first step in taking away from institutions, such as the Catholic church, the role of investigating complaints and determining compensation for victims,” Sullivan said at the time.

But in its submission released on Tuesday, the council included in its proposal the suggestion that “financial redress … be capped and determined by reference to community standards”.

Sullivan told Guardian Australia the change in position was about “facing reality” after informal feedback from government consultations and studies of established schemes.

“If we want all the governments and small institutions to participate in a national scheme the government won’t go near anything that isn’t capped,” said Sullivan, adding that the cap should be determined by “community consensus”.

The proposal did extend the provision of financial compensation to the immediate family of victims, and said the provision of counselling for victims should have no limits.

“The ongoing support which necessarily involves expenditure by the institution is uncapped,” Sullivan said.

“In the case of counselling support, assistance with getting jobs, helping people get housing, those sort of practical pastoral needs, that support is ongoing so therefore there isn’t a sort of endpoint in that regard.”

The council said participation in the scheme should be mandatory for all relevant institutions – a view in line with the Uniting church but at odds with the Salvation Army, which said any scheme should be “opt-in”.

“The council is of the view that if governments in Australia establish a national redress scheme, all governments (Commonwealth, state and territory) and relevant institutions should contribute to and participate in the scheme,” the submission says.

“The council considers that equity for all claimants can only be achieved if participation in a national redress scheme is mandatory for all governments and relevant institutions.”

Institutions would cover all redress and administration costs for claims that relate to them, it said.

“A fund would need to be established to provide for matters where no institution remains in existence. The council has proposed ... a funding model based on a levy on public liability insurance for institutions that have contact with children.”

The submission also called for a time limit of six months for a victim’s claim to be finalised – based on the balance of probabilities and with an assumption of truth if an abuser was convicted – in order to limit the ordeal.

“From the council’s point of view, redress schemes must not be a way for institutions to effectively ‘wash their hands’ of those seeking redress by channelling them into a scheme administered by another entity and simply writing a cheque at the end of it”