Under the changes visa applicants may need to supply biometric data and the number of visas available could be slashed.
The federal government says Australia's visa system is in need of reform.
It's released a consultation paper seeking feedback on its plan for a major overhaul of the current system, including a probation period before permanent entry is granted and cutting the number of visa types from the current 99 to just 10.
It's also flagging collecting biometrics from applicants, like fingerprints and eye scans.
Australia's current system has been in place for almost 30 years and Immigration Minister Peter Dutton has told Adelaide radio it's too complex and outdated.
"We're not living now in the late forties, early fifties, or at a time when Australia needed to 'populate or perish', as the rhetoric was at the time. We are now more nuanced in the way we want people to come here with skills, with capital to set up businesses."
According to a 2015 OECD report, over 80 per cent of eligible migrants have become Australian citizens and more than five million people have been granted citizenship since the process was introduced in 1949.
The government says it hopes simplifying the system will lead to an even bigger number of migrants calling Australia home.
However, it wants a clear distinction between temporary visas and permanent residency.
It says permanency should be an option only for migrants who will boost the economy, such as international students and skilled workers.
Jenny Lambert, from the Australian Chamber of Commerce and Industry, says there's a misconception that temporary visas are a shortcut to residency.
"But we're very comfortable with the idea that we need to make it clearer to the community that by no means should evereybody who is on a temporary migrant visa move towards permanency. It shouldn't be seen as a pathway, an automatic approach, and if the community has that impression we need to change that perception."
Under the current system, most of the permanent visa categories don't have a provisional stage and applicants aren't required to spend any time in Australia prior to applying for - or being granted - permanent residence.
But that could change as well, with the government set to explore the notion of a probation period prior to the granting of a permanent visa.
Nick Tebbey, from the Settlement Council of Australia, says while he believes there is a good case for simplification, there should be exemptions for refugees.
"The idea of imposing a Provisional Visa does have some troubling components to it. Certainly for people and for certain cohorts of migrants, so for example humanitarian entrants, where at the moment they are brought to Australia on Protection Visas, which are Permanent Visas. They're obviously fleeing persecution and need Australia's protection. So to bring them here on a Provisional Visa and say they may or may not eventually get permanent residency seems contrary to our protection obligations and that would be something we'd want to see carefullly catered for in any move."
The visa overhaul is the latest instalment in the government's national security plan.
It's also continuing its push for a new citizenship test which includes tougher, university-level English language requirements for those considering Australian citizenship.
Minister Dutton says citizenship is a privilege and acclimatising to Australia's way of life is paramount for those wanting to become an Australian citizen.
"But we do want a competent level of English language. We do want people to abide by Australian laws and adhere to Australian values and if they don't then clearly we don't want them to become an Australian citizen."
