Neither the Coalition nor Labor was able to secure the 76 House of Representatives seats required to form government.
Initial results have seen a considerable lower house swing against the ruling party, with seats lost to Labor and independents.
As the clock approached midnight, supporters welcomed federal Labor leader Bill Shorten to the campaign headquarters stage in Melbourne.
"Three years after the Liberals came to power in a landslide they have lost their mandate. And Mr Turnbull's economic program, such as it was, has been rejected by the people of Australia."
In Sydney, Prime Minister Malcolm Turnbull addressed Liberal Party followers.
"The circumstances of Australia cannot be changed by a lying campaign from the Labor Party. The fact that we live in times of rapid economic change, of enormous opportunity, enormous challenges, a time when we need to be innovative, we need to be competitive, we need to be able to sieze those opportunities - those times are there. No politicians can give a speech, write a policy, send a message and change the reality of the circumstances in which we live and the policies that will enable us to meet those times with success."
The hours after voting closed have revealed a sustained swing of over three per cent in the House of Representatives against the Liberal-National coalition.
With over 50 per cent votes counted, and around 16 of the 76 seats without a projected outcome, there were predictions from within the major parties that Australia may be heading towards another hung parliament.
At midnight the Australian Electoral Commission had the coalition projected to take 70 seats, with Labor close behind on 68.
On a two-party preferred basis Labor took the lead on 50.10 per cent.
Labor has claimed several important seats from the Coalition, including Eden Monaro in New South Wales, traditionally regarded as the seat that always reflects the outcome of the election.
Independents, too, took a share - with the Liberals' Jamie Briggs conceding defeat to the Nick Xenophon Team's Rebekha Sharkie in the traditionally blue-ribbon South Australian seat of Mayo.
Tasmanian independent Andrew Wilkie, meanwhile, claimed the metropolitan Hobart seat of Denison.
He's told Sky News in the event of a hung parliament, he will make no deals.
"I've made it absolutely clear now - right through this campaign and I'll be true to this. I will not enter into any agreement with the Liberal party or the Labor party which will allow them to form government. Instead I will approach any issue and every piece of parliamentary business on its merits including budget supply and confidence - so there's no point giving me a call tonight because there's no deals."
Nationals leader Barnaby Joyce held onto his seat, following a tough contest against Tony Windsor, the independent who returned from retirement to contest New England in New South Wales against the deputy prime minister.
Mr Joyce told Channel Seven his victory is the work of a dedicated team that's listening to the electorate.
"We've got such an incredible team that works so very hard and we started working the day we had the great honour of representing the people of New England. I've always put it front and centre of what I do, as well as that we do a great job for the nation. The people of New England expect that. They expect a strong seat and a strong nation. And we've done that."
The Coalition also retained the Melbourne seat of Higgins, the Liberals' Kelly O'Dwyer holding only by a close margin against an unlikely challenger, Jason Ball of the Greens.
The Greens will likely keep Adam Bandt's seat of Batman in the city's north.
Richard di Natale was in Victoria to celebrate improved results for the Greens in the lower house of parliament.
"We have seen swings of ten per cent to the Greens in Higgins, in Wills, in Batman and in Melbourne Ports where it's a three-way contest."
The 2016 federal election has seen the first first Indigenous woman enter the House of Representatives.
17 Indigenous candidates contested seats in the two houses of federal parliament.
In the south Sydney seat of Barton, former state parliamentarian Linda Burney was the first to claim victory.
She's told Sky News history is being made.
"Barton has created history tonight in Australia by electing the first Indigenous woman to the House of Representatives. (It's) not my achievement, but the achievement of the people around me, and the achievement of this electorate. The wonderful, wonderful seat of Barton."
The Australian Electoral Commission says around 15.5 million eligible voters registered for the 2016 federal election.
It says just under three million pre-poll votes were submitted, and around one million postal votes returned.
Counting for the House of Representatives resumes on Tuesday, and the Senate a day earlier.
