A Senate committee will examine the government's plans for a $4 billion natural disaster kitty, which Labor has condemned for being sourced from an education infrastructure fund.
The legislation breezed through the lower house on Tuesday with the government's majority.
Opposition education spokeswoman Tanya Plibersek said by setting up the fund in such a way, the coalition was pitting two "worthy aims" against each other.
"Of course we should be helping communities deal with natural disasters, but why this needs to be at the expense of much needed investment in education infrastructure is not clear," she said during debate on the bill.
The Senate's finance and public administration legislation committee is due to report on the bill by October 10, with submissions open until Wednesday next week.
Centre Alliance MP Rebekha Sharkie said her Senate colleagues - who hold two crucial votes - would be keeping a close eye on submissions to the inquiry.
Ms Sharkie shares Labor's concerns with the bill, namely that it puts an end to the education infrastructure fund.
She questioned why the money had been sitting still for years, considering the government had recently been focused on "cost-saving measures".
Through the fund, $150 million would be available each year to support communities facing a significant or catastrophic event.
Labor is also concerned the legislation only allows for infrastructure after a natural disaster has struck.
"That's not really mitigation," Ms Plibersek said.
Instead, Labor has called on the coalition to work closely with local communities to develop projects in areas at high risk, before an event occurs.
Independent MP for Warringah Zali Steggall supported the bill, but said $4 billion was "nowhere near enough" to battle the ongoing impacts of climate change.
Ending the university infrastructure fund jeopardises Australia's attractiveness as a destination for international students, Ms Plibersek argued.
Government minister David Coleman insists closing the university infrastructure fund won't change the coalition's funding to the sector.
"Through grants or other funding arrangements, the emergency response fund will be available to support the delivery of projects and services, or promote the adoption of technology directed to achieving recovery from natural disasters," he said.
Labor leader Anthony Albanese accused the government of politicising natural disasters, but assured the coalition he was ready to help.
"Any level the government wants to put into emergency response, we will do," Mr Albanese said.
Australian Associated Press