The bill was introduced to parliament today.
If passed, it would require aspiring citizens to sit a more challenging English language exam.
Labor is undecided on the bill, but is already warning the new English test could be too hard.
Would-be citizens will need to prove they can read, write and speak English at a 'competent' level, if the government's reforms pass through parliament.
The law would leave it up to the Immigration minister to decide what 'competent' means.
But Labor's Tony Burke says the government has floated an increase to IELTS 6*.
And he warns many would find that far too hard.
"If you take a 6, universities start admitting people - some of them demand a 5.5. So this is harder than it is to get into some universities. So with a series of these issues, we're setting standards that a very good number of Australians who were born here do not meet and will never meet."
Tony Burke warns that could create an underclass of migrants who never pass the test, and spend their lives in Australia living as non-citizens.
Applicants who hold passports from English-speaking countries like the United Kingdom, Ireland, Canada, the US and New Zealand will not be required to sit the English test.
The bill also confirms permanent residents will need to wait four years before taking the citizenship test.
Immigration Minister Peter Dutton says applicants will need to sign a values statement.
"The Australian values statement includes an understanding of respect for the freedom and dignity of the individual, freedom of religion, commitment to the rule of law, parliamentary democracy, equality of men and women, equality of opportunity for individuals regardless of their race, religion or ethnic background. And English language, as the national language, is an important unifying element of Australian society."
The Prime Minister, Malcolm Turnbull, is pressuring Labor to back the bill, despite its reservations over the English requirements.
"They're unable to support the need to demonstrate integration into the Australian community. They're unable to support a requirement to commit to our values and pledge allegiance to Australia."
But Labor is yet to make up its mind on which elements of the citizenship changes it will support.
Opposition Treasury spokesman,Chris Bowen, points out the bill has only been available to read since this morning.
"The Immigration Minister's been standing at the despatch box, bellowing about Labor voting for legislation he hadn't introduced and we had not seen. So we'll of course now take the opportunity to examine the legislation and take it through our normal party processes."
