Sky News reports Indonesia is seeking the guarantee after the Australian government floated the prospect of shifting the embassy from Tel-Aviv to Jerusalem.

But Senator Cormann says the caveat wasn't raised with him during meetings with senior ministers in Indonesia last week.

"That is not something that was put to me," he told Sky News on Friday.

The two nations have been planning to sign the landmark free trade agreement during the Association of Southeast Asian Nations summit in Singapore on November 14, Fairfax Media reported on Wednesday.

Senator Cormann said Australia continues to work constructively with Indonesia and is keen for the deal to be signed by the end of the year.

"It will help deliver beneficial outcomes both for people in Indonesia and here in Australia, and we have continued to work to secure a successful conclusion," he said.

The coalition floated the prospect of shifting Australia's Israel embassy during the final week of by-election campaigning in Wentworth, where more than 12 per cent of voters are Jewish.

Indonesia, the world's largest Muslim country, was quick to warn against the step.

"Indonesia encourages Australia and other nations to continue to support the peace process and not conduct any action that could undermine the peace process and global security," Indonesian Foreign Minister Retno Marsudi said at the time.

Ms Marsudi also warned Australian Foreign Minister Marise Payne before the announcement of the impact it would have, in a series of terse messages obtained by Seven News.

"It will be a really big blow. It will slap Indonesia's face on the Palestine issue. This will affect bilateral relations," Ms Marsudi reportedly said to Senator Payne over WhatsApp.

The free trade deal is Indonesia's first major agreement of its type, and it will open up the country for Australian universities.

Australian Associated Press