More than 1,000 veterans and their families have travelled to Vietnam to mark the 50th anniversary of the Battle of Long Tan on Thursday.
"We have been working with the Vietnamese government for over 18 months for this, towards making sure that this commemoration took place in a low-key, dignified and respectful way," Veterans Affairs Minister Dan Tehan said.
"For us to be given such short notice of the cancellation is, to put it in very frank terms, a kick in the guts," he said from Canberra.
Tehan said he was bitterly disappointed at the decision which he said "should not have occurred".
"My hope is that the Vietnamese government will overturn it," he said, adding that Prime Minister Malcolm Turnbull was hoping to speak to his Vietnamese counterpart on the issue.
As commemorations marking Long Tan began in Australia, Tehan said Canberra had gone out of its way to ensure the Vietnam event was low-key.
Tehan said it appeared the decision was based simply on the sensitivities relating to Long Tan, and did not relate to any other aspect of the relationship between Canberra and Hanoi.
Australia's Department of Foreign Affairs said while the Vietnamese authorities had cancelled the commemoration ceremony for Vietnam Veteran's Day at the Long Tan Cross site on August 18, private access to the site may still be permitted.
Australian veteran Peter Taylor, who served in Vietnam in 1969-70 after the Battle of Long Tan and who organises battlefield tours in the region, said the decision came as a shock.
"We do commemorations every year. There are about a thousand Australians who have come out for this one. There's never been a problem before so we're not sure what has happened.
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