Government-appointed doctors will assess all new disability payment claims, under new changes announced by Social Service Minister Kevin Andrews.
Centrelink currently rejects about half of the 2,000 applications for disability support it receives each week.
The changes which come into effect from January 1 are expected to result in a further five-per-cent of 'borderline' claims rejected.
Mr Andrews said the change would lead to a more efficient and equitable welfare system, with more people returning to work.
"We believe that having a job is meaningful for people," Mr Andrews said.
"Obviously it's better for the taxpayer as well."
A spokesperson for the minister said many of those rejected for disability payments will be placed on the lower-paying Newstart jobseekers allowance, with stricter reporting obligations.
Opposition's treasury spokesperson Chris Bowen said people who were able to work after being on benefits needed support and encouragement.
"Of course, everybody wants to see anybody who can work in the workforce," Mr Bowen said.
"But Australia does not need to demonise those on the disability pension."
Graham Wells, a lawyer with the group Social Security Rights Victoria, said his biggest concern was the marginalisation of welfare recipients.
"If there's people doing the wrong thing we want to weed those out. But is this the best way of doing it?" Mr Wells said.
Mr Wells was himself a welfare recipient while he recovered from surgery for brain tumours. He said that support was crucial.
Forty-year-old Melbourne man Nick Kusic was working full-time as a plumber until severe epilepsy forced him to quit. Regular seizures meant he was under constant supervision.
He said he'd rather work than be on welfare, but it's too risky.
"The doctors actually won't let me work," Mr Kusic said. "Plus I can't drive."
