Ministers are reported to be keen to make applicants more aware of their rights and responsibilities rather than testing a general awareness of sport and culture.
Introduced by the former Conservative government, the current tests have been criticised for favouring migrants from English-speaking countries.
Immigration minister Chris Evans, originally from the UK, said questions about cricketers, billiard players and famous explorers were irrelevant.
He hopes the amendments will help newcomers better understand their responsibilities to the community and integrate more easily into their new home.
Under the proposed changes, the pass mark will move from 60 to 75 per cent and applicants will be asked to answer 20 multiple choice questions in English.
According to the Australian Visa Bureau, since the introduction of citizenship in 1949, over four million migrants have become Australian citizens.
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