The latest mishap at sea involving boat people came less than a week after Australia slammed the door on would-be refugees with a deal to send all boat arrivals to Papua New Guinea for assessment and eventual settlement.
As many as 170 people were on board the vessel, which broke up in heavy seas late on Tuesday, News Ltd reported.
More than 100 people, mostly from Iran and Sri Lanka, were rescued by fisherman in the area overnight, it said.
The Australian Maritime Safety Authority (AMSA) confirmed that a rescue operation was underway, without providing further information.
"Indonesian authorities are coordinating the rescue of that incident. AMSA is not involved at this stage," a spokeswoman for the authority said.
Indonesia's National Search and Rescue (Basarnas) was not immediately available for comment.
Refugee policy and immigration are hot political issues in Australia, particularly with an election looming in a few weeks.
On Friday, Australian Prime Minister Kevin Rudd announced tough new measures to stem what has been described as a dramatic increase in the number of refugee boats setting out on the perilous journey from Indonesia.
More than 15,000 asylum seekers have arrived by boat in Australian territory this year, igniting a heated debate on refugee policy and prompting opposition accusations that the ruling Labor government is soft on border protection.
That number trying to reach Australia however is tiny compared with refugee arrivals elsewhere in the world and the new policy has been condemned by human rights groups. Amnesty International said Australia was shirking its moral obligations and turning its back on the world's most vulnerable people.
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