Immigration Minister Peter Dutton says he won't back down on his proposed overhaul of Australian citizenship laws, despite the proposal dying quietly in the Senate.
The controversial crackdown would have imposed a values test, tough English language test and a four-year waiting period for permanent residents wanting to become Australian citizens.
But the move was blocked by Labor, the Greens and the Nick Xenophon Team, who used their numbers in the Senate to impose a Wednesday night deadline for Mr Dutton to strike a deal.
That failed to materialise, despite a last-ditch compromise offer from Mr Dutton to ditch the retrospective element of the plan and delay the start date to July 2018, and reduce the level of English required from "competent" to "modest".
The NXT rejected that offer, insisting the whole bill would have to be ditched and its components renegotiated to garner its crucial support.
"Just amending the English language test and retrospectivity is not sufficient," NXT senator Stirling Griff said. "We will still be rejecting the bill."
The effect of a Greens motion agreed by the Senate last month meant the citizenship bill was struck from the notice paper when the Senate adjourned on Wednesday night - without a vote.
However, the government could revive the bill in the event of a deal with the NXT or others - but that will require a majority of votes in the Senate.
Labor's citizenship spokesman Tony Burke hailed the outcome as "a great victory for every person who wants to pledge allegiance to this country and make a commitment to Australia".
He warned the government "will try again", and urged the Department of Immigration and Border Protection to commence processing citizenship applications lodged after April 20 - the date the Turnbull government announced the changes.
However, a spokeswoman for Mr Dutton would not confirm whether that would now would occur.
"The government is committed to strengthening citizenship and our negotiations will continue with the independent senators," she said.
"It's a shame that Bill Shorten is so weak that he has to capitulate to the hard left of the Labor Party against the national interest."
Labor grappled with the proposed measures, which Mr Shorten initially said "sounded reasonable", before a groundswell of internal opposition led the party to harden its position.
Mary Patetsos, chairperson of the Federation of Ethnic Communities' Councils of Australia, welcomed the rejection of the bill as "really good news for multicultural Australia".
"This legislation would have created a permanent underclass of Australian residents that would have been denied them the rights and opportunities of being welcomed as Australian citizens," she said. "We are delighted that it has been thrown out of the Parliament."
Ms Patetsos also urged the department to process applications which had been waiting since the April announcement.
The immigration department has advised the Commonwealth Ombudsman that due to a backlog of applications it has not yet started processing applications made after April 20.
The Ombudsman told applicants it would monitor the bill's progress and also the actions of the department in the event the legislation were delayed.
The citizenship bill would not be the only immigration reform to be effectively abandoned by the government. A bid to prevent refugees who tried to reach Australia by boat from ever obtaining any type of Australian visa has never been brought on for debate in the Senate.
