A group of Sri Lankan asylum seekers looks set to be processed on the Pacific Island of Nauru after Indonesia said it would simply return them to their homeland if it were asked to deal with the 83 men.
The fate of the Sri Lankans remains undecided, more than a week after they were intercepted by the Australian Navy in international waters.
Foreign Minister Alexander Downer said he was still awaiting a decision from Indonesia about whether it would allow the men to be processed by the United Nations High Commission for Refugees (UNHCR) in Indonesia, where they boarded a wooden vessel to come to Australia.
But Indonesia's Department of Foreign Affairs said it had made its position clear.
"We are ready to receive them, to receive the 83 Sri Lankan asylum seekers back to Indonesia, with the understanding that this is only for a transit," spokesman Desra Percaya told reporters in Jakarta.
"(We will be) sending them back to their country of origin.
"We don't see any necessity, any need, for the international organisation to get involved."
Speaking to reporters, Mr Downer said the men, currently undergoing health and identity checks on Christmas Island, would likely be sent to Nauru if Indonesia refused to have them processed by the UNHCR there.
Mr Downer said the Indonesian government was reluctant to process the men despite Australia offering to pay for it.
He said the government had not made a final decision on where to send the refugees if Indonesia formally refused, but Nauru was most likely.
"If they decide that they don't want the processing to take place in Indonesia then obviously one of the options for us is to have them processed in Nauru," Mr Downer said in Adelaide.
"What we want to do is send a message to the people smugglers that you cannot just get people to Australia through them paying a few hundred or thousands of dollars to a people smuggler who can make a profit out of it.
"They can go through the normal procedures but not through some corrupt and evil people smuggling operation."
Sri Lanka has demanded the men's return and branded them economic migrants whose claims to asylum are "baseless".
Refugee groups fear for the men if they are returned to Sri Lanka because of the ongoing civil war between the government and rebel Tamil Tigers in the island's north.
Mr Downer said he had guaranteed each man's asylum status would be assessed under UN standards.
"These people will be processed according to law and according to Australia's obligations under the refugee convention," he said.
"There is no need to be concerned about that."
The issue is likely to be discussed when Indonesia's Foreign Minister Hasan Wirajuda and Mr Downer meet in Jakarta next week.