Labor will oppose the government's proposed lifetime visa ban on asylum seekers who use people smugglers.
The government argues its border security policy needs to be further toughened, as it negotiates a third-country deal to resettle some of the more than 2000 asylum seekers and refugees on Manus Island and Nauru or convince them to return to their home countries.
The Labor caucus rejected the bill at its meeting in Canberra on Tuesday morning.
Labor frontbencher Chris Bowen said earlier the "little plan" by the government was ill-conceived and an attempt to steer the debate away from the coalition's internal problems.
Opposition leader Bill Shorten says that while Labor wants to defeat people smugglers, he is calling the government's announcement to introduce a life-time entry ban on asylum seekers who try to reach Australia by sea 'ludicrous'.
Mr Dutton gave the strongest indication yet of an imminent resettlement agreement.
"We are going to land a deal," he told reporters in Parliament House.
The minister accused Labor leader Bill Shorten of having lost control of his party.
"The left has got control over the sensible right and Mr Shorten obviously has lost out to the crazy left within the Labor Party," he said.
Labor argues the laws could lead to people being banned from visiting Australia as tourists or for business reasons.
Mr Dutton said it was a "nonsense red herring".
The draft laws, which will be introduced to parliament later on Tuesday, reportedly exempt those aged under 18 at July 19, 2013 and give the minister discretion to exempt people if it is in the "public interest".
The minister said asylum seekers now flowing through Europe could look for an alternative route through Indonesia to Australia.
"If (Labor's) argument is that 'look there's no problem here, that boats are not going to restart', that people smugglers have somehow gone to another line of business, it shows they have not learned one lesson of the failure of their years in government," Mr Dutton said.
