Tens of thousands of families would be hit by a proposal to make migrants wait four years before accessing a range of welfare benefits.
Legislation already before parliament seeks to push the welfare waiting period for newly-arrived migrants from two to three years, in a measure expected to save $1.3 billion.
The federal government is now proposing to stretch the wait times for migrants out to four years from July 1.
The extra squeeze on migrants is expected to save an additional $200 million.
The government predicts 66,000 migrant families will be forced to wait longer for tax benefits, and 47,000 people will be impacted by the freeze on access to Newstart, Youth Allowance and other payments.
Social Services Department officials say the two cohorts are not mutually exclusive, with some migrant families tapping into other welfare payments.
Department officer Shane Bennett played down concerns the proposal would prove a disincentive to migration.
"There is evidence from the OECD that reflects access to social security systems is not necessarily high on the factors people consider," Mr Bennett told a Senate estimates hearing on Thursday.
"There is also a Productivity Commission report from 2016 that shows non-humanitarian permanent migrants had effectively lower take-up rates of income support to the general population."
Migrant and community groups have pushed back hard against moves to extend welfare wait times, fearing it could force some new arrivals into destitution and poverty.
Exemptions will continue to apply for vulnerable groups and humanitarian entrants, while hardship provisions also will also remain in place.
In a separate budget measure, newly-arrived refugees could also be made to wait six months before accessing Centrelink's jobseeking program.
The change, which doubles the existing three-month wait, is expected to save $68 million over the next four years.
"This measure will improve the sequencing of services available to refugees ... assisting refugees to focus on settlement and improving language skills during the first 26-week period of their arrival," the budget papers said.