Until recently, non-citizens had a slim opportunity to join the ADF but their applications were forced to the bottom of the pile.
In an email sent last year, the head of Australian Defence Force recruiting said citizenship was a key criterion to enter the ADF.
"Permanent residents will only ever be forwarded to the services for a waiver decision when there are no other candidates with Australian citizenships," the email said.
In response, the Government's security vetting agency said: "Given the wider Government focus on mitigating the insider threat, all existing applications from non-Australian citizens have been withdrawn."
That meant all New Zealanders who arrived post-2001 would not be accepted into the ADF, regardless of the circumstances.
Expat New Zealanders have been campaigning for the right to enlist in Australia for years and have been lobbying politicians across the ditch.
The Returned Services Association has backed their campaign, saying the Australian policy went against the history of co-operation between New Zealand and Australian soldiers.
The decision to withdraw non-citizens' applications for the ADF is the latest chapter in a long-running battle over expat New Zealanders' entitlements in Australia.
The changes in 2001 withdrew several types of benefit (unemployment, youth and sickness) for New Zealanders - who enter Australia on a Special Category Visa.
But the most significant change was to make it much harder to get citizenship.
It required Kiwis to compete with other immigrants for permanent residence - which is capped - instead of being able to skip that and apply directly for citizenship.
In 2016, Australia loosened the rules to create an easier path to citizenship under certain conditions, including a requirement that they had earned A$53,000 for five consecutive years.
The Australian law change in 2001 was designed to stop "backdoor" migration from the Pacific Islands and Hong Kong Chinese, who gained New Zealand residency to settle in Australia.
