The Nadesalingam family, known as the Biloela family, have received permanent visas after returning to their adopted Queensland home town.
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Immigration Minister Andrew Giles said he had intervened in the case following careful consideration, and provided the family visas allowing them to remain permanently in Australia.
"This government made a commitment before the election that, if elected, we would allow the family to return to Biloela and resolve the family's immigration status. Today, the government has delivered on that promise," he said.
"This decision follows careful consideration of the Nadesalingam family's complex and specific circumstances.
"I extend my best wishes to the Nadesalingam family."
Opposition Home Affairs spokesperson Karen Andrews said the decision to grant the Nadesalingam family permanent visas set "a high-profile precedent".
"It undermines the policy that if you come here illegally you will never settle in Australia," she said.
"Together with Labor's policy to abolish temporary protection visas, this gives people smugglers a product to sell to desperate families and people."
Mr Giles said the Albanese government remained committed to hardline border policies, including Operation Sovereign Borders, aimed at stopping people smuggling.
"During the past two months, the government has demonstrated we will continue to intercept and return any unauthorised vessels seeking to reach Australia," he said.
"For anyone who attempts to migrate via an unauthorised boat to Australia - you will be caught, returned or sent to a regional processing country.
"I do not want people to die in a boat on a journey when there is zero chance of settling in Australia.
"This has not changed since the last government. We are not considering changing this policy."
A group of Biloela residents advocating for the Tamil asylum seeker family, called HometoBilo, first announced the development on Twitter on Friday afternoon.
"At 2.30pm today the Nadesalingam family, affectionately referred to as the 'Biloela family', were visited by the Department of Home Affairs team at their Biloela home and given the news that they have been granted permanent visas," the group tweeted.
IN OTHER NEWS:
Nadesalingam Murugappan, known as Nades, his wife Priya Nadesalingam and their Australian-born daughters Kopika and Tharnicaa returned to the central Queensland town in June after a four-year legal ordeal during which they were detained.
Nearly 600,000 people signed Home to Bilo campaigner Angela Frederick's petition supporting the family, and more than 53,000 phone calls and emails were made and sent to Australian politicians.
The asylum seekers and their children were detained in 2018 and courts found they were not refugees, a decision that was subsequently upheld.
A 2019 attempt to deport the four was halted at the 11th hour, when a court injunction forced the plane carrying them to land in Darwin.
A federal court then ruled the youngest daughter Tharnicaa should remain in Australia along with her family as her claims to a protection visa were assessed. The family was taken to Christmas Island detention.
In 2021, Tharnicaa was evacuated from Christmas Island for medical treatment due to a blood infection.
Priya, Nades and Kopika received bridging visas to remain in the country, but Tharnicaa was not, forcing the family to live in community detention in Perth.
After Labor won government in May, then-interim Home Affairs Minister Jim Chalmers gave the family permission to return to Biloela on bridging visas.