In tough talk ahead of the budget, Social Services Minister Kevin Andrews also repeated warnings that the days of young Australians sitting at home on the couch collecting welfare cheques were over.
He said the government believed young people should be either be working or training for work.
"The message out of this is simply this. The days of easy welfare for young people are over. We want a fair system but we don't think it is fair that young people can just sit on the couch at home and pick up a welfare cheque. Those days are over," he told reporters in Melbourne.
Mr Andrews confirmed the budget, to be delivered on Tuesday night, will introduce rules that mean some people collecting the DSP disability support pension will be reviewed for capacity to work.
That will apply to some 10-20,000 people who had gone onto the DSP in the last 5-6 years but not yet assessed under new impairment tables.
"If they are capable of working, whether it is full-time or part-time, then our expectation is that they should be working," he said.
Mr Andrews said measures announced on Tuesday would be just the first instalment of reform.
He said former Mission Australia chief executive Patrick McClure had completed his discussion paper on welfare reforms but would review it in light of budget changes.
The review will be released for public consultation after the budget.
"I will be taking to cabinet further proposals for welfare review. This will go to the structural arrangements," Mr Andrews said.
Mr Andrews said the welfare system now comprised some 50 payments, allowances and supplements assembled ad hoc over the years.
"It is time to have a clear look at making structural change so far as welfare is concerned," he said.
Proposed changes are in line with the report of the National Commission of Audit which said the DSP was costing $15.8 billion a year.
Opposition health spokeswoman Catherine King was critical of the changes to the DSP.
"Why would you be punishing them? Why would you be punishing their income security payments and trying to restrict their access to income support whilst at the same time cutting a whole lot of benefits that support them into work," she told reporters in Melbourne.
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