The Immigration Department has already cancelled 15,066 foreign student visas in the past year, a 37 per cent spike from the previous year.
About 3,624 students are facing deportation for flunking subjects or missing classes and a further 2,235 visas were cancelled on students who quit their original courses and were either working illegally, in some cases in brothels, 'The Daily telegraph' reported.
The report said that Indian students have been hit the hardest where as Chinese students were fared better as they were less likely to be studying for a trade.
Under the new rules, University graduates will have the right to work here for two years after they graduate, leaving vocational training students to wait on a second tranche of changes, due next year, to find out where they stand.
Of the 332,709 international students in Australia in June, more than half were studying at university, while a third were on vocational training visas studying diploma courses.
The report said that one in every five international students is Chinese, while one in every six is Indian. The majority of international students were placed in New South Wales and Victoria.
To receive a visa students must be enrolled in a course and show they can pay tuition and living costs and meet health and English language tests.
Immigration Department offers eight kinds of student visas - including vocational training, university, English language courses or school education visas.
The department's annual report said that 8,309 student visa holders became "unlawful" in the past year because their student visa expired and they did not apply for a new one, such as a bridging visa.
In some cases, foreigners were not genuine students and use the work rights of a student visa as a back door to higher wages and working conditions in Australia.
Some women have come to Australia on student visas to work in illegal brothels.