Five coalition senators have backed Pauline Hanson's bid to outlaw vaccination mandates, defying the government's decision to reject her move.
After a sometimes fiery debate, the Senate on Monday overwhelmingly rejected - 44 votes to five - the progress of a One Nation private bill.
Prime Minister Scott Morrison later defended the dissenters, insisting the Liberal-National parties were able to deal with differences from time to time.
"We do not agree with the measures that were in the bill ... that will seek to centralise power more in Canberra," he told reporters following the bill's defeat.
"I respect the fact individual members will express a view and vote accordingly for those."
Government senators Matt Canavan, Gerard Rennick, Alex Antic, Concetta Fierravanti-Wells and Sam McMahon voted for the bill.
Senator Hanson, appearing by videolink, claimed vaccine mandates had unleashed a "pandemic of discrimination" as she talked up vaccination side effects and unproven COVID-19 treatments.
The One Nation leader took aim at state premiers for introducing mandates and adopted Mr Morrison's position about Australians having had a "gutful" of governments telling them what to do.
But she accused Mr Morrison of being weak by not legislating removal of state vaccine mandates.
"If the prime minister is not happy with my bill then change it," Senator Hanson told parliament.
Senator Canavan called vaccine mandates "unfair, cruel, unnecessary and unAustralian".
"I thought I was born in a free country," he said.
Senator Rennick called for the government's indemnity scheme to be expanded, saying people who listened to the government's health advice and experienced side effects from the vaccine had been scorned.
Independent senator Jacqui Lambie accused One Nation of thriving on discrimination and creating fear to boost its election campaign.
"You have freedom to make a choice, but those choices have consequences.," she said.
"You are choosing to do something that puts other people's lives at risk and you will be held accountable for that choice."
Being vaccinated was a patriotic act to get the country out of lockdowns and keep fellow Australians safe, Senator Lambie said.
"It's called being a goddamn bloody adult! It's putting others before yourself."
Labor senator Kristina Kenneally criticised the government for allowing the bill to be debated, saying the prime minister had "dog whistled to extremists".
The government is facing an uphill battle with its legislative program in the upper house, with senators Rennick and Antic threatening to abstain from votes unless mandates are scrapped.
Senator McMahon has signalled she may withhold her vote as a last resort if her bill on Northern Territory rights was not scheduled for debate.
It was left off the Senate agenda in favour of Senator Hanson's bill.
Senator Hanson had promised to cause "mayhem" for the government over the issue, but could now back in government bills after having her draft laws debated.
Australian Associated Press
Sign up for our newsletter to stay up to date.