Default subphase settings are the settings that are applied to newly created subphases. These settings can include the phase time tracking settings, member rates, and rate multiplier. The default value utilizes the value specified in the organization setting.
Learn more about organization default budget settings
The options are:
Use Project Settings: The newly created Subphases will have the same settings as the project.
User Parent Phase Settings: The newly created Subphases will have the same settings as the parent phase.