The proposal, under a "world-first" plan proposed by the government, will be introduced to the parliament soon and would prohibit registered sex offenders from traveling overseas.
BBC report that the Justice Minister Michael Keenan said it would affect about 20,000 offenders who had completed punishments but remained under monitoring by authorities.
'Sex offenders would be able to apply for passports if they were no longer on the register. No country has ever taken such decisive and strong action to stop its citizens from going overseas, often to vulnerable countries, to abuse kids,' Mr. Keenan said.
He described child sex tourism as an "absolutely abhorrent crime".
According to the Australian government, about 3,200 sex offenders would never be eligible for passports because they were being monitored for life.
The proposal was reached with independent Senator Derryn Hinch, long time campaigner for tougher laws to deal with sex offenders.
Mr. Hinch told reporters on Tuesday that the proposal would protect children.
'You go to Bali, you go to Phnom Penh, you go to Siem Reap, and you see these middle-aged Australian men there, Caucasian men, with a young local kid - they are not there to get a suntan,' He said.
The action comes after an Australian man identified as Robert Andrew Fiddes Ellis was in 2016 convicted of sexually abusing 11 girls in Indonesia and jailed for 15 years.