The Senate has voted down the Government's regulations excising thousands of islands from Australia's migration zone.
The Government changed the regulations when the Indonesian fishing boat carrying 14 Turkish Kurds arrived at Melville Island, north of Darwin, earlier this month.
The boat was towed into international waters by an Australian Navy ship and the asylum seekers are now in Indonesia.
The Democrats moved the motion to disallow the regulations and it passed with the support of Labor, the Greens and three of the four Independents.
Prime Minister John Howard says the Labor Party is soft on border protection for voting to disallow the regulation.
Labor's Nick Sherry told the Senate the islands should be part of Australia's migration zone.
"Cutting out islands from Australia's sovereignty is just the start. What will come next? The Liberal Government is saying to the people smugglers 'the more you come, the more we will give up'," he said.
"Once the people smugglers start coming to the mainland, the next logical move in this game is to excise parts of the mainland."
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