The Australian Maritime Safety Authority says it is unlikely the bodies of three asylum seekers, believed to have drowned in waters north of Christmas Island, will ever be found.
Up to 134 men, women and children are believed to have been on board when their vessel capsized on Wednesday.
A total of 130 people have been rescued and one body has been recovered.
Three people are still missing but Australian Maritime Safety Authority says the search has been called off.
All the survivors have been taken to Christmas Island for medical treatment, the ABC reports.
The sinking comes less than a week after a separate boat capsized, killing about 90 asylum seekers on their way to Australia.
Meanwhile, another asylum seeker boat with an estimated 100 people aboard has been intercepted on Thursday, north-west of Christmas Island.
The passengers were to be transferred to Christmas Island where they will undergo health and identity checks.
Asylum bill to be considered by Senate
A bill to allow offshore processing of asylum seekers moves to the Australian Senate after it was passed by the lower house on Wednesday.
But the ABC reports that the laws appear doomed as neither the Opposition nor the Greens are likely to back them in the Senate.
The latest asylum seeker emergency prompted a marathon political debate over the legislation to restore offshore processing proposed by independent MP Rob Oakeshott.
Australian Prime Minister Julia Gillard said if the legislation passed both houses of Parliament, the Government would agree to reopen the detention centre on Nauru, set up an inquiry into the use of temporary protection visas and implement Labor's plan to send asylum seekers to Malaysia.
The Opposition wants asylum seekers sent only to countries that had signed the United Nations Refugee Convention - a move that would rule out Malaysia.