Prime Minister Tony Abbott reportedly wanted to send more than 3000 defence force personnel to Iraq to fight Islamic State.
News Corp Australia reports that Mr Abbott raised the idea of sending 3500 troops to the troubled nation in a meeting in Canberra in November last year, saying the action would help stop IS in the north of the country.
Mr Abbott is said to have taken to the idea to military officials, who told him it would be disastrous for the troops.
It would have made Australia the only nation with troops on the ground in Iraq.
Authorities have said about 90 Australians have gone to the Middle East to fight, including in Iraq and Syria, the latest of whom is reportedly a 23-year-old university student from Perth.
Finance Minister Mathias Cormann rejected the claims made in the report.
“That story is wrong. The prime minister never sought such advice,” Mr Cormann said on ABC Radio.
“My advice is that the journalist who wrote that story actually never put that proposition to the prime minister’s office when seeking comment.”
Labor frontbencher Matt Thistlethwaite said this was a very damaging leak from the National Security Committee of Cabinet, one of the most important internal committees of government.
He said Labor had given bipartisan support to actions the government had taken on Iraq. That includes deployment of a special forces team of 200 to advise the Iraqi military.
“But if the prime minister or anyone in the government is considering changing that approach then they need to disclose that to the Australian public and they need to disclose that to the parliament and the Labor Party so that we can consider,” he told Sky News.
Treasurer Joe Hockey also rejected the claim in a tweet.
The story by John Lyons today in @australian is just complete and utter rubbish. Factually wrong. Same as Garnaut in @smh yesterday.
— Joe Hockey (@JoeHockey) February 20, 2015