The Salvation Army says 28 per cent of its respondents could not afford a substantial meal once a day.
More than half of respondents to a Salvation Army survey are often going without meals, while two-thirds are having to cut down on buying basic necessities.
The National Economic and Social Impact Survey is the charity's biggest study of its clients, surveying 2,700 people across more than 200 Salvation Army centres around the nation.
The findings also highlight the impact poverty is having on children, with many missing out on school activities, new uniforms and annual dental check-ups.
Salvation Army spokesman Major Bruce Harmer says the findings are alarming.
"This report shows that the issues that we're facing as a community are deepening and the Salvation Army is concerned how families out there are faring just below the radar," he said.
"Families are a very big part of our community, and if parents are unable to provide for their families they face stark realities and stark choices - like 'will I feed my family or will I keep my family warm?'.
Key Findings
"And the flow-on effects for children as they grow up in a dysfunctional or disadvantaged family are very severe indeed."
- 2,705 clients surveyed across 237 Salvation Army centers
- 66 per cent have cut down on basic necessities
- 28 per cent cannot afford a substantial meal once a day
- 27 per cent cannot afford heating in one room of the house
- 58 per cent can't pay utility bills on time
- 92 per cent have no savings
- 35 per cent cannot afford prescriptions
Major Harmer says 30 per cent of people surveyed could not afford to fill prescriptions after going to the doctor, and 60 per cent were unable to access dental treatment.
"The findings are quite disturbing to the Salvation Army," he said.
"To have to say no to your children if they can't go to a party because they can't afford a present or they can't go to a school-based activity because they can't afford it... these things have a cumulative effect and children grow up disadvantaged and they miss out on the luxuries of life.
"But for the parent, they feel like they've failed and they feel like they've let their children down."
The Salvation Army estimates that one in six children in Australia now live at or below the poverty line.
Half of the people who took part in the survey have children in their house.
The report also found a 12 per cent rise in the number of people receiving Newstart payments compared to last year. That figure was particularly high in the ACT, at 25 per cent.
It also found 7 per cent of single parents were homeless, while the same amount were living with friends or relatives.
The organization is calling on the Government to step up.
"We know it's hard to make ends meet out there at the best of times," Major Harmer said.
"Government grants are simply not enough and the Salvation Army and other agencies like the Salvation Army are stepping into the gap to make up the difference.
"So we would really call on the Government to have a really good look at the state of their benefits and try to bring them up to speed so the average person can make ends meet.
"It's important the Federal Government steps up to the plate.
"We have a huge issue here and it's been here for a long time - just under the radar there are large numbers of families who are really struggling and this research shows that."
The organization released the survey ahead of its annual Red Shield Appeal, which takes place this weekend.
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