Australia has moved closer to sending thousands of Iranian asylum seekers back to Tehran, with the Abbott Government on the verge of an historic agreement to deport detainees.

The West Australian understands a high-level Iranian delegation visited Australia this week to draw up a memorandum of understanding that would allow the return of Iranians held in immigration detention camps, some for several years.

In return for taking back failed asylum seekers, Australia would offer scholarships to Iranian university students.

The Government may even agree to turn down its strong travel warning advising Australians not to go to Iran.

Australia would also offer Iranian citizens work and holiday visas and Iran might be allowed to build consulates in Sydney and Melbourne.

The Iranian delegation, led by director-general for consular affairs Ali Chegeni, met Foreign Minister Julie Bishop and Immigration Minister Peter Dutton over two days.

Any deal with Iran — once dubbed part of the axis of evil — would be a major shift in Australian foreign policy.

It is believed any deal would demand there would be no retribution from the Iranian regime towards returned asylum seekers.

Almost 300 Iranian asylum seekers are on Manus Island and 166 on Nauru. Another 440 Iranians are in detention centres on the Australian mainland and 8000 have bridging visas.

Under the former Labor government, Iranians comprised a big proportion of the asylum seekers making their way to Australia on boats.

But though many were found not to be refugees, the government was unable to return them to Tehran because Iran refused to accept them.

Immigration officials often pointed to some Iranian asylum seekers as being the most troublesome to manage in the detention centre network.

Ms Bishop made an historic trip to Iran in April, where Australia agreed to share some intelligence with the country around the conflict in Iraq.

Iran is playing a major role in the Iraq war. The country’s troops are fighting some of the most effective battles against Islamic State but there are fears the Iranian presence in Syria could further inflame sectarianism between Sunnis and the Shi’ites.