Footage of partygoers gathered at Sydney's Bronte beach has drawn criticism from locals and health officials.
Large crowds gathered at the beach, with social distancing guidelines not being adhered to. Local media has reported that most attending the parties appeared to be British and Irish.
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Covid restrictions for Christmas Day in Australia restricted outdoor gatherings to no more than 100 people outside.
Alex Hawke, Australia's minister for immigration, warned that temporary visa holders could have their stay cut short if they have been found to be breaking regulations.
He said the government would not hesitate to deport those flouting the rules, despite harsh restrictions on international travel.
He said: "We don't want to be canceling visas. In fact most temporary visa holders have done the right thing. However, if these people continue to do the wrong thing and breach public health orders, we will take action with our powers under the Migration Act."
Compared to other western countries, Australia has been relatively unscathed by coronavirus due to strict measures restricting travel and tough rules domestically.
However, a Covid cluster in Sydney's northern beaches in recent weeks has seen 122 new cases confirmed.
In total, Australia has had 28,350 confirmed Covid-19 cases and 909 deaths.