Up to 20 families could be permanently separated under proposed laws that would stop asylum seekers who came by boat from ever entering Australia.
Lawyers and refugee advocates have also warned the bill expands Home Affairs Minister Peter Dutton's discretionary powers even further.
The laws would apply to nearly 3000 refugees who have come to Australia via boat since 2013 and been transferred to offshore processing centres in Papua New Guinea and Nauru.
The Morrison government said the bill would stop asylum seekers using a "back door" to settle in Australia, by gaining permanent residency in another country and later applying for an Australian visa.
"This legislation sends a strong message to people smugglers and those considering travelling illegally to Australia by boat: Australia's borders are now stronger than ever," Mr Dutton said.
But a refugee who was detained for five years in one of Australia's offshore processing centres said the scheme would further punish people who had suffered enough.
Amir Taghinia, who was 19 when he was sent to Manus Island, was recently offered permanent residency in Canada.
He said the laws would mean he would never be able to come to Australia to meet the people who had been a lifeline to him and the other detainees.
Mr Taghinia told a Senate inquiry into the bill the laws would "punish people who have already been punished without due process".
"I am not a criminal. Banning this group of people from entering the country without due process is prejudiced," Mr Taghinia said.
"We are punishing people that are already being punished and they've already been harmed in order to make an example for future cases."
Another concern is the bill would give Mr Dutton even greater powers to make decisions on individual cases.
The minister would be able to overrule the visa ban in cases where there was a clear public interest for the person to enter the country.
Refugee Legal executive director David Manne said it was "impractical" to vest such a power in "one person in the country".
"It's what I would call a job description problem to give one person in the country the call, the personal power on this, when ordinarily in our country there is a decision making process under administrative law," Mr Manne said.
"I can assure you from our experience over decades that the use of that power in other areas was not only impractical, it's been opaque, it's not conformed with the ordinary standards of transparency and accountability under Australian law, it's been highly inconsistent with its application and at time seen some ministers literally agree for people to stay so they can be with their Australian child and some ministers say not."
The inquiry also heard concerns the laws would make it unlikely asylum seekers on Manus and Nauru would accept resettlement in other countries, if they had family members in Australia.
Home Affairs Department officials also admitted there were families who could be permanently split by the bill, as some members had arrived in Australia before the July 2013 cut-off.
"We don't have exact data on how many people are split ... anecdotally we know it's a relatively small number, we're aware of about 10 to 20 cases," senior assistant secretary of the regional processing and resettlement arm, Alana Sullivan, said.
And while the bill had languished on the notice paper for nearly three years, first assistant secretary of the legal division, Pip De Veau said the need for the legislation grew stronger by the day.
"As time goes on, more of the regional processing cohort will have settled in the US, they may travel around the world to various places and those that have settled in other places as well may very soon be knocking on the door to come back to Australia," Ms De Veau said.
"The concern is once they're in Australia even on a temporary basis it's very difficult then to ensure they won't be here more permanently and it in a sense flies in the face of the stated proposition that people are not meant to have arrived in this way, are not meant to have a pathway here."
Operation Sovereign Borders commander Major General Craig Furini said people smugglers were constantly assessing the environment to look for weaknesses in Australia's border protection policies.
"The people smuggling threat prevails. We've done a good job to date of suppressing it and keeping people from attempting these boat journeys but as we've seen they watch what happens here very closely, we see interest peak, and falsehoods get peddle and so we need to maintain the multilayered approach," Major General Furini said.
"There still is offshore a strong desire for people to come to Australia, it's still an attractive destination and there's still people smugglers out here marketing any changes any opportunities, constantly marketing false hope so we have to remain vigilant and we can't afford to relax our guard because there are people pooled off shore willing to make the journey."
Mr Taghinia said while he did not agree with the business of people smugglers, he would not be alive without them.
"I have heard this over and over, people paying smugglers to come to Australia and getting drowned but there is one thing here we all forget to think about - how many of these people that made it to Australia would have been alive today if they chose to stay back in their countries," Mr Taghinia said.