Prime Minister Julia Gillard has staked a large part of her political future on achieving the Malaysia agreement.
Her announcement in early May that Australia would swap refugees with Malaysia set off a flurry of diplomatic talks and meetings.
But the documents obtained by Lateline show how difficult it will be to achieve an agreement and how hard Malaysia is pushing.
The draft agreement includes amendments made by Malaysia on Monday last week, including that Malaysia wants to decide which asylum seekers it accepts.
"The following persons shall not be transferred to Malaysia for processing," the document said.
"Persons who the Malaysian authorities do not provide consent or approval for the transfer."
And Malaysia wants Australia to cover nearly all costs of the refugee swap, including transport, education, health, housing, resettling costs as well as the relocation of asylum seekers to third countries.
"Where the Transferee do (sic) not agree to return to their country of origin, voluntarily forced returns may be necessary. In this event, the Government of Australia will be fully responsible to accept and ensure voluntarily forced returns," the document said.
Malaysia is also insisting on sending 4,000 refugees to Australia regardless of how many asylum seekers it takes in return.
"This number of illegal immigrants in Malaysia who have been officially issued with the UNHCR card will be resettled even if the Government of Australia does not seek to transfer the total 800," the document said.
The draft agreement also reveals that Malaysia has removed all reference to human rights in the revised document and does not want the UN Refugee Convention to cover its side of the deal.
"The treatment of the Transferee while in Malaysia will be in accordance with the Malaysian laws, rules, regulations and national policies," the document said.
Refugee and Immigration Legal centre coordinator David Manne says the documents expose Malaysia's reluctance to commit to human rights.
"What the document shows is that there is a real reluctance by Malaysia to commit to a clear inclusion of human rights standards and guarantees," he said.
"For example, in the document refugees are referred to as illegal immigrants. There's no reference to the word asylum seeker. There's certainly no reference to human rights."
The deal also relies on the participation of the United Nations High Commission on Refugees (UNHCR), which will process the asylum seekers.
But the UNHCR is concerned that Malaysia is not a signatory to the UN Convention on Refugees and has a reputation for treating asylum seekers harshly.
They live in cramped conditions and police routinely arrest them for working illegally.
Lateline has obtained a series of internal emails from the UNHCR that shed light on the negotiations.
From these emails, it is revealed why there is no reference to human rights in this draft of the agreement - Malaysia removed it.
In one email, Alan Vernon, the UNHCR's representative in Kuala Lumpur, outlines the changes made.
"The Malaysian text removes the standards of treatments contained in the earlier versions with language stating the transferees will be treated in accordance with Malaysian laws, rules, regulations and national police," the email said.
"Other changes include that Malaysians would clear the list of transferees [and the] removal of the reference of human rights in the introduction."