Labor warns welfare recipients could be forced into homelessness or a life of crime if the federal government pushes ahead with a planned crackdown.
The government is close to securing the Nick Xenophon Team's support for its welfare bill which has been languishing in the Senate.
The minor party is likely to support a large chunk of the proposed welfare changes, with conditions, in exchange for $40 million towards drug and alcohol rehabilitation services.
Acting Opposition Leader Tanya Plibersek warned punishing vulnerable Australians by docking their payments and pushing them into poverty would not work.
"There is a risk that people will be pushed into homelessness and even potentially pushed into a life of crime," she told reporters in Sydney on Wednesday.
Finance Minister Mathias Cormann insisted the changes will help more Australians off welfare and back into the workforce.
"They help ensure our welfare system remains affordable and financially sustainable for future generations," he said in a statement.
The government was forced to abandon plans to drug test welfare recipients from January after the Senate shot down the idea late last year.
But it's pushing ahead with a demerit-point system in which people could lose payments for up to a month if they don't apply for enough jobs.
The government is also still seeking to introduce cashless welfare cards to two new trial sites, tighten exemptions for drug and alcohol dependence, and roll seven welfare payments into one.
NXT senator Stirling Griff said the minor party's deal with the government was not 100 per cent locked in and flagged a party meeting in the next week.
"It's very close but there are still some details that need to be discussed," he told AAP.
Skye Kakoschke-Moore's exit from the Senate because of dual citizenship woes had disrupted negotiations, but Senator Griff expects a deal to be finalised within weeks.
