Immigration Minister Peter Dutton has given 7,500 asylum seekers living in Australia until October to lodge an application for protection, or face deportation, declaring the "game is up" for "fake refugees".

Key points: Asylum seekers given until October 1 to lodge an application for processing

Asylum seekers given until October 1 to lodge an application for processing Otherwise they will be cut off from Government payments, subject to removal from Australia

Otherwise they will be cut off from Government payments, subject to removal from Australia 7,500 asylum seekers costing taxpayers about $250 million each year, Mr Dutton says

Mr Dutton said the asylum seekers had all arrived by boat under the previous Labor government, most without identity documents, and had so far either failed or refused to present their case for asylum with the Immigration Department.

"If people think they can rip the Australian taxpayer off, if people think that they can con the Australian taxpayer, then I'm sorry, the game's up," he said.

"They need to provide the information, they need to answer the questions and then they can be determined to be a refugee or not."

The asylum seekers have now been given until October 1 to lodge an application for processing or they will be cut off from Government payments, subject to removal from Australia, and banned from re-entering the country.

According to Mr Dutton, the group is costing taxpayers about $250 million each year in income support alone and the deadline would ensure the Government is "not providing financial support to people who have no right to be in Australia".

Labor's immigration spokesman Shayne Neumann said asylum seekers cannot remain in Australia indefinitely, and should be applying for protection as soon as possible.

But Mr Neumann criticised Mr Dutton's use of the term "fake refugees" and said it was no wonder the Administrative Appeals Tribunal was overturning 40 per cent of the Minister's decisions on visas.

South Australian Senator Nick Xenophon said the new policy would have public support and appeal to the Coalition's support base, but urged the Government to take a "calm, methodical and fair" approach.

"I only hope that the Government puts as much effort into dealing with job seekers as it does with asylum seekers," Senator Xenophon said on Insiders.

'Cruel and unfair'

But refugee advocates slammed the "arbitrary" deadline as "cruel and unfair".

GetUp's human rights director Shen Narayanasamy said while many of the asylum seekers had been in Australia for years, they were only given the go ahead to lodge an application for protection last November.

"Asylum claims are incredibly long, torturous documents," she said.

"And what Peter Dutton has failed to tell you is that he has denied them interpreters and access to legal assistance."

Of the 50,000 asylum seekers who arrived by boat between 2008 and 2013, 43,000 have now been processed — which means they have either been granted a visa or had their claims rejected — or are currently having their claims assessed.

However, there are 7,500 asylum seekers "outside the process" and that is the group now subject to the October 1 deadline.