The federal government’s power to detain and deport refugees who commit crimes in Australia has been severely curtailed by a federal court ruling.

The government has been ramping up the use of a strict character test to cancel or deny visas to thousands of non-citizens, including refugees since the criteria was strengthened in 2014.

But in a judgment handed down on Christmas Eve as part of the case of a Tamil refugee held in detention for more than 10 years, Justice Steven Rares said the controversial character provisions in section 501 of the Migration Act do not apply to refugees.

Human Rights for All director principal Alison Battisson, who represented the Tamil refugee, said the finding was “incredibly significant”.

“We are quite excited, it could impact thousands of people,” Ms Battisson told SBS News.

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Under the s501 character test, a visa holder who is sentenced to at least 12 months in jail automatically fails and faces deportation.

The immigration minister also has discretionary powers to kick out any non-citizen he deems poses a threat to other Australians.

“There is an emerging trend of asylum seekers who have been in the community for years or decades, such as Iraqis who sought asylum when Saddam Hussein was in power who have then run up against the law in a minor, or sometimes major way, but normally a minor way, and 20 years later find themselves with their protection visa cancelled,” Ms Battisson said.

Due to Australia’s obligations under the international refugee convention, that has meant people who cannot be returned to their home country have been locked up in detention indefinitely.

The judgment will come as a blow to Prime Minister Scott Morrison who last year vowed to “punt” refugees who commit crimes in Australia.

Mr Morrison issued the warning after an Iraqi refugee working as a Sydney security guard was sentenced to four and a half years’ jail for indecently assaulting a three-year-old girl.

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Human rights lawyer George Newhouse agreed the federal court judgment had profound implications for those seeking asylum as well as those who have had their protection visa cancelled in recent years.

“If I were an asylum seeker in immigration detention right now and my visa had been cancelled under s501 (character test), I’d be having a good long look at this case," he said.

Justice Rares said the s501 character test shouldn’t apply because asylum seekers’ character is already assessed in the process to determine if they are entitled to a protection visa.

Under that test, only those guilty of much more serious crimes, such as mass murder, would fail.

Mr Newhouse said it was appropriate to have a more lenient character test for those fleeing persecution and danger compared to the bar other visa applicants must meet.

“The consequences of having a visa revoked or being denied a visa are horrendous. If they are forced to return home, they could face physical or even mental harm, or even death," he said.

In light of the judgment, Ms Battisson has written to the Home Affairs Department requesting a review for 14 other clients in detention who were denied a visa on character grounds.

One of her clients arrived as a 16-year-old boy with mental health issues and developmental delays.

“He acts out and that’s been used against him. He’s now 22 and still in detention," she said.

READ MORE Plans to tighten character test put tens of thousands of migrants at risk of deportation

In August, Immigration Minister David Coleman said the government’s harsh policies had led to 4,700 foreign criminals having their visa cancelled in the past six years - seven times the amount Labor kicked out in the previous six years.

In the 12 months to June 2019 alone, 943 visas were cancelled on character grounds.

As of October 2019, nearly 600 people were being held in immigration detention facilities after failing the s501 character test, but it’s unknown how many of those are refugees.

The Home Affairs Department refused to provide figures on how many refugees’ visas had been cancelled under the test.

A spokesperson for the department said the department was aware of the federal court’s decision in relation to the Tamil refugee and is considering the judge’s reasons.

The government can still appeal the decision to the full bench of the federal court or the High Court.

“The minister may appeal a decision of the Federal Court If he is of the view that the decision is affected by an error of the law,” the department spokesperson said.