The Australian reported on Monday that despite a number of allegations of the company being a security risk, it still enjoyed some support in Canberra.
One industry source was quoted as saying: "There won’t be a ban and any decision on what role Huawei plays will be outlined within the framework of the Telecommunications Sector Security Reform."
But other companies that are likely to bid for a role in the 5G rollout have also come under a cloud.
Critics of Huawei have produced no evidence to justify their claims that the company poses a security risk, only saying that it could have links to the Chinese leadership.
The TSSR will take effect on 18 September and will impose numerous obligations on telcos: a security obligation, a notification requirement, information gathering power and directions power.
Huawei has provided 4G equipment for both Optus and Vodafone mobile networks for use in the radio access network layer. If it is considered a high-risk provider, then it could be limited to operating in the core network that authenticates users.
The source said: “In the 5G space, the core and the radio networks will be aligned a lot closer through software and that’s what why concerns have been raised."
Huawei has pushed for setting up a security assurance centre in Australia, the same as it has in the UK, and this may come to fruition as part of deal for a limited role in 5G
The company has recently bolstered its lobbying in Canberra, enlisting Matt Stafford, the former cabinet secretary to Prime Minister Malcolm Turnbull on its lobbyist roster, according to a report in InnovationAus.
The company has former Victorian Labor premier John Brumby on its board and its Australian operations are chaired by John Lord, a former rear admiral with the Royal Australian Navy.
Huawei was banned from bidding for contracts for Australia's national broadband network, the NBN, in 2012.
Australia has also acted to prevent the company participating in an undersea cable project linking the Solomon Islands and Papua New Guinea to Sydney.
American fears about the company extend back nearly a decade with the NSA having hacked into Huawei's offices in Shenzhen in 2010, according to documents released by whistleblower Edward Snowden.
iTWire has contacted Huawei for comment.