A new super agency called the Australian Border Force will replace Customs by the middle of next year.
Immigration Minister Scott Morrison has confirmed a major border protection budget shake-up.
Mr Morrison has outlined his plans to establish a new frontline agency called the Australian Border Force.
The agency, which will merge the border protection roles of Customs and the immigration department, will be led by a commissioner who will report directly to the minister.
The move is in line with a recommendation in the National Commission of Audit commissioned by the Abbott government.
The agency, which is expected the be up and running by the middle of next year, will remove duplication and potentially save the government hundreds of millions of dollars.
"Every cent we save by doing this we will reinvest back into this agency," Mr Morrison told ABC radio on Friday.
It will include airport and maritime officers, investigators as well as those responsible for tracking down illegal goods.
It will also manage immigration detention and removals.
There had been speculation customs was running deficits because its maritime operations were under-funded.
Mr Morrison said the new force will pick up where Operation Sovereign Borders leaves off but did not give a time frame on when that would be.
A new National Border Targeting Centre will also be established, from July this year. And a special training college will be set up for border force officer recruits.
Meanwhile, Mr Morrison has just returned from a monthly meeting on refugee resettlement arrangements with his PNG counterpart in Port Moresby.
The first set of refugee status decisions have been handed down this week but Mr Morrison did not reveal how many.
He said about half were positive.
PNG's cabinet will consider the resettlement package next week.
Mr Morrison said material collected as part of Robert Cornall's independent review into the violence on Manus Island, in which asylum seeker Reza Berati had died, had been handed to PNG authorities.