The Turnbull government is on the verge of overhauling the welfare system after negotiating with the Senate crossbench over the long summer break.
Debate on 200 pages worth of proposed welfare changes is due to resume in the Senate on Tuesday after stalling at the end of last year.
Drug testing of welfare recipients has been dumped from the bill, and the vast bulk of remaining measures are expected to pass with the crucial backing of the Nick Xenophon Team.
However, sources say several sticking points have emerged during talks in recent months.
The proposed changes include a major overhaul of compliance measures, including a demerit-point system for people who persistently dodge job-seeking obligations.
The coalition also wants to remove "intent to claim provisions", which protect people who are entitled to welfare but cannot lodge a claim due to personal circumstances.
Community organisations fear these changes, among others, could further punish vulnerable people as well as dependent family members of welfare recipients.
The legislation also seeks to tighten exemptions for drug and alcohol dependence, increase wait times for unemployment payments, and axe the wife pension and bereavement allowance.
A spokeswoman for Rebekha Sharkie, who has played a leading role in negotiations for the Nick Xenophon Team, said some concerns about the bill remained.
"They (NXT) are still in discussions with the government and there is no position at this moment," she told AAP.
However, new Social Services Minister Dan Tehan is sounding hopeful of a positive outcome.
"We are working constructively with the crossbench senators to secure the passage of this important reform," he said.
Labor and the Greens are fierce critics of most of the changes.
"There's a range of sticking points," Labor senator Doug Cameron told reporters in Canberra on Tuesday.
"Especially in relation to older women who are doing it tough, losing payments. There's a raft of issues we will not support."
Greens senator Sarah Hanson-Young says the minor party is willing to talk about how to make legislation better.
"But all the government cares about is handing tax cuts to their big business mates ... and kicking everyone else in the guts," she said.
The Australian Council of Social Services is urging the crossbench to hold firm against the bill.
