Dozens of asylum seekers living in Australia after receiving medical treatment lost their $200 fortnightly welfare payment from Monday.
They have three weeks to leave their government housing, an Immigration department notice has confirmed.
Immigration Minister Peter Dutton said around 60 people - mostly single men - would receive notice letters imminently.
"From Monday 28 August you will need to find money each week for your own accommodation costs. From this date you will also be responsible for all your other living costs like food, clothing and transport," the letter reads.
"In the next three weeks you need to move out of government-supported accommodation."
The crackdown may eventually affect around 400 asylum seekers who came from the offshore detention centres on Manus Island and Nauru to receive medical treatment in Australia.
The asylum seekers were transported to Australian hospitals for medical care and were expected to return to the offshore centres on Manus Island and Nauru when their treatment was complete.
They will now be placed on a special new visa: the 'final depature Bridging E visa', which compels recipients to leave the country.
"We want people to go [back] voluntarily," Mr Dutton told ABC Radio on Monday.
"They won’t be staying in Australia, they will be going back to Nauru," he said, referring to the group of 400.
"If … they’ve received their medical assistance and they're refusing to go back to Nauru then they will not be provided with the assistance."
Many of the people affected are now engaged in a legal fight to remain in Australia.
The Human Rights Law Centre, which represents many of the affected asylum seekers, said it would continue to fight for its clients to remain in Australia.
"These cases have a very simple proposition: our clients would suffer serious harm if they were returned," the Centre's executive director Hugh de Kretser told SBS World News.
Sydney's The Daily Telegraph has been given examples of asylum seekers "exploiting" the system, including a case where a man fell off gym equipment and another with a "stomach complaint".
Another asylum seeker reportedly spent money on prostitutes.
"The government doesn't bring people here from Nauru and Manus because they’ve got a headache, they bring them here because they require urgent medical treatment," Mr de Krester said.
"We have women who have been sexually assaulted on Nauru, we have kids who have been so traumatised by what they've seen in immigration detention on Nauru that they require urgent psychiatric help, we've got men who've been bashed on Manus Island who suffered serious head injuries who've been brought to Australia."
Refugee advocates say the government is trying to make the asylum seekers "destitute" to force them back to Manus Island and Nauru.
Labor and the Greens have voiced their strong opposition to the move.
Labor's immigration spokesman Shayne Neumann said the opposition would look for ways to block the welfare cut-off.
Mr Dutton said that was a "backflip" from Labor and a departure from bipartisanism on immigration matters.
He said it would "send a bad signal" to let the group stay in Australia, creating the appearance of a medical route into the country that could “encourage self-harming” in detention centres.
SBS World News presented a series of questions to the Immigration department, but the department pointed to Peter Dutton's recent media appearances.
The asylum seekers will still receive some healthcare assistance through Medicare and will be given access to a community case worker.
