Wildfires are now burning across the country's two most-populated states in what has been described as "apocalyptic" scenes.
Thousands of people have been forced onto the beaches in Australia as massive bushfires hit popular holiday resort towns.
Holidaymakers have fled into the water as the blaze moved into the Victorian town of Mallacoota in New South Wales on Tuesday morning.
Two are now confirmed to have died with five others still missing and feared dead with "significant losses" to property.
Police said a father and son died in the early hours of Tuesday defending their home in Cobargo, near the coast in the state of New South Wales (NSW), 280 miles south of Sydney.
New South Wales Rural Fire Service Commissioner Shane Fitzsimmons said it was unsafe for police to get to the locations due to the ongoing threat from fires.
"We have three people unaccounted for and the potential for three potential fatalities as a result of the fire on the south coast," Fitzsimmons told media.
Two people are feared dead in the town of Cobargo, and one in Belowra.
A further four people are unaccounted for in the state of Victoria, the site of some of the fiercest recent fires, although authorities have not provided further information.
Prime Minister Scott Morrison has said the reports of people unaccounted for is "very distressing".
He has requested assistance from 70 firefighters from the United States and Canada.
People trapped on the beaches have posted pictures online of a deep-red sky caused by the large flames and reported a high level of smoke.
Authorities said Mallacoota is "currently under attack" and a number of houses are understood to have been lost around the community.
"We've got three strike teams sitting in with the community, literally standing by side-by-side with our community at the beachfront as they'll protect the two townships, up to two streets in that," CFA chief officer Steve Warrington told reporters.
"Reports from crews I spoke to on the ground half-an-hour ago, it is pitch-black. It is quite scary in that community."
Around 4,000 people are still believed to be at Mallacoota, which has been besieged by fire since about 8.30am local time, according to Australian news sources.
A number of people communicating via social media have said they and their families have boarded boats to escape the fires.
Most of the blazes have been sparked by lightning, he said, warning that conditions were volatile, with fires potentially smouldering following lightning strikes from the past two or three days.
For those stuck on the beaches the RFS is now talking to marine agencies about the possibility of evacuating people by sea because there is no other chance of escape, reports 9News.
Several popular holiday spots along the coast between Sydney and Melbourne are currently under threat from bushfires.
The most serious "emergency-level" blazes span a 500km (310 miles) stretch from Batemans Bay in New South Wales to Bairnsdale in Victoria.
Residents in other beachside communities, including Bermagui in New South Wales, were also reported to have sought shelter in the water, local media reported.
However, people in those regions - many of them tourists - have been told to stay put as it is too dangerous to evacuate now.
"We have three strike teams in Mallacoota looking after 4,000 people on the beach as the fire goes into that town," Emergency Management Commissioner Andrew Crisp told ABC News on Tuesday.
Mallacoota resident Mark told ABC about 10am: "It was pitch black up until two minutes ago and now half the sky is red, embers are dropping out of the sky.