Dozens of people are dead or missing after a boat carrying asylum seekers heading to Australia capsized off the Indonesian island of Java.

There were reportedly about 170 people on board the boat when it broke up and sank in heavy seas on Tuesday evening.

Indonesian authorities have pulled about 100 people from the water. A body of a child had been recovered and was the only confirmed fatality so far, reports AFP.

Rescue efforts are underway for many victims still believed to be in the sea.

The engine of the boat started smoking and taking on water shortly after setting of from the fishing village of Cidaun in Java, the Sydney Daily Telegraph said.

A refugee from Iran said the captain, who he claimed was a Sri Lankan man, and the Malaysian crew abandoned them before the boat sank.

The incident comes days after Australian PM Kevin Rudd announced that asylum seekers arriving by boat will be resettled to Papua New Guinea for processing.

The tough new measures sparked riots in an Australian-run detention camp in the Pacific island nation of Nauru.

Rudd said the new asylum policy was aimed at dissuading people from making the dangerous voyage to Australia by boat, BBC reports.