The "No Jab, No Pay Bill" introduced to Parliament would also remove a category of "conscientious objector" that allowed parents to remain eligible for full government benefits despite not immunizing their children.
"The choice made by some families not to vaccinate their children is not supported by public policy or medical research, nor should such action be supported by taxpayers in the form of family payments," Social Services Minister Scott Morrison told Parliament.
Exemptions would apply only for valid medical reasons.
The legislation is likely to be passed by Parliament without any amendments. Public reaction to the proposed change has been overwhelmingly positive.
While 97 per cent of Australian families that claim tax benefits for their offspring are vaccinated, the number of children under 7 years old who are not vaccinated because their parents are objectors has increased by more than 24,000 over the past decade to 39,000, the government said.