Foreign Minister Julie Bishop said she was dismayed at news of the transfer and indicated there would be fallout if Indonesian authorities pushed ahead with the planned executions.
"I am dismayed by these reports that preparations are being made for their executions,"
Ms Bishop told Network Seven on Wednesday.
She said she is not aware of any specific date or timing of the proposed executions. She reiterated calls for President Joko to show mercy to the Bali Nine ringleaders.
"I would argue that mercy and forgiveness has as big a place in Indonesian legal concepts as it does in Australia," Ms Bishop said.
The government had not received any official information about transfer, she told Network Nine. Ms Bishop said she planned to speak to the families of the two men later on Wednesday.
Lawyer Peter Morrissey said the Australians were now going through a "very serious" process of dealing with the news they might be at the end of their lives. Chan and Sukumaran were handling it, he said: "But they don't have much choice".
"It's not like somebody who has an injury before a football game or something like that where they say I'm devastated," he told ABC Television on Wednesday.
"They're coming to terms with that and trying to make sure their community around them and families are with them, supporting them and not too upset.
"It's a very raw time for them."Ms Bishop said she would continue talking to Indonesian authorities.
"I won't give up making representations. I will continue to contact my counterpart ministers. I have spoken to the vice president. I have personally spoken to the vice president and also to the foreign minister on numerous occasions," Ms Bishop told the Seven Network.
She described the situation as "appalling", saying the men had been rehabilitated.
There are more than 100 Indonesian police on guard outside Kerobokan jail as Chan and Sukumaran prepare to be transferred for execution.
The police arrived after 3am local time and positioned a water cannon outside the jail.
Bali's prosecutor said on Tuesday the Australians would be removed from the prison about noon, but it appears they will move earlier.
Just before 4am local time (9am NZ time), an armoured military vehicle arrived on the scene. Police were expected to give a media statement at 5am.
Earlier, prison governor Sudjonggo said he had supper with Chan and Sukumaran until 9pm.
They asked him what they were allowed to pack for Nusakambangan, the island where they will be executed with eight other drug offenders.
Sukumaran, who has become an accomplished artist during his nine years in jail, would take pencils and a drawing book.
Chan, who has been ordained as a Christian minister, would take only clothes, Sudjonggo said.
Both men would take bibles, he told reporters.
The Australians have become the prison's model inmates, introducing various forms of rehabilitation for other inmates.
At midnight, a handful of former art students of Sukumaran and other supporters of he and Chan held a small prayer vigil at the prison door. They lit candles and remained in silence.
-AAP
