I've looked into this case now, and if I understand it correctly, there are two pieces of international law that have bearing:

Refugee Law:
Refugees must apply for asylum at the first safe haven they find. As these people (seeking asylum from Afganistan) were in a boat leaving from Indonesia, Australia has no legal obligation to consider asylum.

Maritime Law:
Any boat that encounters shipwrecked or overboard people must pick them up and grant them passage to the next port. Wether or not the refugees deliberatly scuttled their boat (and I have heard both sides argued) is immaterial.

So, in short: Australia is legally obliged to allow these refugees to be put off on their shores, but they may then immediatly deport them back to Indonesia (or which ever other country they first entered where they could apply for asylum).

winter"any corrections gratefully accepted"mute