One-time terror suspect Mohammed Haneef is free to return and work in Australia.

The former Gold Coast Hospital registrar will have his visa returned after the Federal Court today dismissed an appeal by ousted Immigration Minister Kevin Andrews.

The court ruling is a second slap in the face for Mr Andrews, whose controversial decision to cancel the Indian doctor's visa was overturned by a Federal Court judge in August.

Government lawyers appealed the decision to the full bench of the court, insisting the then Minister had been right to force Dr Haneef out of the country due to his relationship with two second cousins with alleged links to a UK terrorism plot.

But their argument was thrown out just after 9.30 this morning when Justice Michael Black, sitting in Melbourne, handed down the court's ruling.

Dr Haneef, who flew home to India in July, is currently visiting Saudi Arabia for the annual Muslim Hajj pilgrimage to Mecca.

He was said to be in good spirits in the lead up to today's court finding.

His lawyer, Peter Russo, has insisted the 27-year-old father of one is keen to return to the Gold Coast, despite his treatment at the hands of the previous government.

He hopes to complete a four-year training course in Australia to qualify as a physician.

Dr Haneef was arrested by Australian Federal Police on July 2 at Brisbane International Airport after police investigating the failed car bombing of Glasgow Airport found his mobile phone SIM card in the possession of one of the UK suspects.

He was held in detention without charge, but the criminal case eventually collapsed.

His visa was cancelled on the grounds he was of "bad character", and he flew out of Australia on July 29.

The president-elect of the Law Society of NSW, Hugh Macken, welcomed today's Federal Court decision.

"It vindicates the role of the court in reviewing administrative and ministerial decisions.''

"It's an example of the courts providing protection for the rights of the citizen against the state.

"It confirms the role of the court as an independent review of all the facts, free from political and bureaucratic influences which is crucial to the administration of justice.

With the decision of the original judge, Justice Jeffrey Spender, upheld unanimously today by a full bench of the court, Mr Macken said there was nothing that presently stood out for consideration by the High Court on any application that might yet be made to seek special leave to appeal.

"Very simply, the evidence didn't support a finding of association by Dr Haneef with a terrorist organisation.''

The government's lawyers today said they would consider whether or not to launch a High Court challenge to this latest decision.

brisbanetimes.com.au, with Jennifer Cooke