Immigration Minister Peter Dutton is adamant the asylum seekers won't be allowed in Australia.
"The men off Manus Island will not be settling permanently in Australia and we will work with the Papua New Guinea government to help them return home or back to third countries," he told the Nine Network on Thursday.
PNG's Prime Minister Peter O'Neill has announced the regional processing centre will be closed following a ruling from the country's Supreme Court that the centre was illegal.
Mr Dutton admitted the government had been planning for the closure since late last year.
"All of our agencies have been contemplating for a long period of time, through the national security committee of cabinet, how we approach these different scenarios."
He said there was capacity to move the men to Nauru but talks were continuing with the PNG government.
"Potentially there is some time for this to be dealt with and we'll deal with it in a measure and reasonable way."
PNG High Commissioner to Australia Charles Lepani says discussions will start next week on working out a plan to close the centre.
Ultimately the decision about what to do was for Australia - PNG's job was only to process the asylum seekers.
"It's not for us to decide or urge Australia to take them on," he told ABC radio.
"We cannot force them to settle (in PNG)."
Refugee lawyer David Manne says the implications of the court decision were "very, very serious", not only in a legal but financial and human sense.
He said it was clear the government had no idea what to do.
"The fundamental fact here is that the government does not have any clear road plan, as it has confessed itself," he told ABC TV.
