The federal coalition will take the recognition of Jerusalem as Israel's capital to the next election.
The Labor government reversed a 2018 decision by then prime minister Scott Morrison to recognise West Jerusalem as Israel's capital and move Australia's embassy.
Foreign Affairs Minister Penny Wong said the decision broke from decades of bipartisanship to have the issue resolved by Israel and Palestine.
Both Israel and Palestine claim Jerusalem as their capital.
She accused Mr Morrison of using the issue as a political football to win votes.
Opposition foreign affairs spokesman Simon Birmingham told AAP the coalition's position had not changed.
"It remains the coalition's view that West Jerusalem is the capital of Israel," he said.
"It functions as the capital for the Israeli government in all purposes.
"So long as it remains Israel's choice, their functional capital going forward, that will be the view we take into the next election and into government if we are re-elected."
But he maintained the final boundaries for Israel and Palestine and the status of East Jerusalem were to be negotiated by the two parties.
The coalition expressed anger at the reversal and how it had been handled by the government, with it being announced on a Jewish holiday and catching the Israeli government off guard.
But when asked why West Jerusalem should be Israel's recognised capital in light of the reversal, Opposition Leader Peter Dutton said: "We took a policy to the last election, we will make an announcement about our policy in the run-up to the next election."
Senator Birmingham said a Liberal-National government would handle the matter more sensitively and consult with all parties if elected.
