The Chinese asylum seekers who were originally headed for New Zealand have applied for asylum in Australia instead, Acting Prime Minister Bill English says.
The group, known as the Darwin 10, had to be escorted into the port at Darwin after suffering mechanical problems.
They had set sail from Malaysia in March.
The members are part of the Falun Gong group, a Chinese spiritual movement which was outlawed by the ruling Communist party.
Prime Minister Julia Gillard insisted yesterday that the yacht was seaworthy and they had not asked for asylum in Australia.
The group have been given until Saturday to decide whether to stay in Australia and be detained, or push on to New Zealand - a destination they chose apparently because asylum seekers do not face mandatory detention here.
English said he had been advised by the Australian authorities that they group had begun proceedings to apply for asylum in Australia.
"That means New Zealand won't have any further involvement with them but we would want to take this chance to thank the Australians for their close cooperation over this issue."
It had been a tricky situation, but one the Government had a plan in place for, he said.