Treasurer Scott Morrison has announced the tougher welfare cut for new migrants, as part of the mid-year economic outlook.
The cut is expected to reduce welfare payments by $1.2 billion over four years.
The extended waiting time will also apply to Paid Parental Leave, the Carers' Allowance and the Family Tax Benefit.
Those bringing relatives over to Australia on a family visa will need to guarantee their financial independence for three years.
There will be some exemptions for vulnerable groups, as well as for some New Zealand citizens with children in their care.
Mr Morrison says the welfare cuts are a necessary move.
"Lower level of payments has been driven by success at getting welfare spending under control as we continue on this path with further measures we are announcing today. Across the Social Services portfolio, payments are expected to be up to 2% lower under the forward estimates. This is due to the changes we have put in place despite the opposition of the Labor Party over several Budgets and getting people back into work. We now are the lowest level of welfare dependency of working age Australians in almost 25 years."
The government says it's on track to achieve its promise of returning the budget to surplus by mid-2021, and expects it to be almost 3 billion dollars larger than projections made back in May.
Mr Morrison also credited stronger-than-expected company tax collections and work by the Australian Tax Office for improving the budget position, while expected government debt has also dropped by around $23 billion over the next four years.
However Treasury's 2017/2018 economic growth forecast has been trimmed to 2.5 per cent, as has wages growth.
Mr Morrison says the government is living up to its promises.
"As we push into the new year, there is still more work to be done but we are on the right track. Jobs and growth will continue to be our mission and our focus. Helping the lives of the thousands of Australians, millions of Australians, and their families and returning the Budget back to balance."
The government will also try a new set of measures to save money on university funding after the Senate defeated a package of cuts announced at the Budget back in May.
The combined measures will save the government $2.1 billion over the forward estimates - but some of those dollars are contingent on the government passing new legislation.
Economist Chris Richardson has told SBS there are few surprises in this update.
"To be fair to the government it's been really really hard to get any budget repair through the senate and through the opposition. And so the government in this budget update today is talking about things by and large that it does not need to get through parliament. One of the new things they are talking about migrants coming to Australia, that brings us benefits and it brings us costs as a nation. One of those costs is welfare payments."
If the Turnbull Government can pass the legislation, there will be a new lifetime cap on the total amount of money the government will loan to any one student for their tuition.
HECS loans will be capped at $104,440 for most students, and a little higher at $150,000 for those studying dentistry, medicine or veterinary sciences.
Finance Minister Mathias Cormann says it's just one of several changes designed to make substantial savings.
"Australia has some of the world's leading higher education institutions but the cost and quality of the system must be sustainable for future generations. Higher education funding will remain at a record high of at least $17 billion annually. And after the planned changes, direct funding to universities for teaching, learning and research will grow by 8% in 2021."
Opposition Treasury spokesman Chris Bowen says the government's changes to higher education in the 2017/2018 budget will affect access to higher education for people from low socio-economic backgrounds.
"We continue to seek tax on higher education, mortgaging the future and attacking one of the sources of Australia's long-term economic prosperity, our higher education. In a way which will impact particularly on those from lower social economic backgrounds who dare to dream of going to university. Labor Party in office opened the door to thousands of Australians to attend university stop Malcolm Turnbull appears intent on slamming that door shut."
Other measures announced by the government include spending of just over two billion dollars on subsidising new medicines, and reducing the cost of some already covered on the Pharmaceutical Benefits Scheme.
Among the new medicines are therapies for bowel cancer, panic-related disorders and chronic skin conditions.
