"We are very concerned to ensure that action is not taken in Taiwan or in the Taiwanese Strait which would cause concern or potential for disharmony in the Strait itself," Smith said.
"It does not lead to stability nor harmony in North Asia"
Stephen Smith, Australian foreign minister
"It does not lead to stability nor harmony in North Asia and we would be much better off if that referendum had not been proposed."
Australia does not support Taiwanese independence, and a Labor government in 1972 granted diplomatic recognition to Beijing.
Last week Taiwan announced plans for a nationwide vote on March 22 on whether to seek UN membership under the name "Taiwan", an act seen by China as a significant step toward formal independence.
The trip to Australia is Yang's first as foreign minister, and also the first by a high-ranking Chinese official since the Labor Party took over the government last November.
The US also opposes Taiwan's referendum move, saying that conducting a referendum would be a mistake and intentionally provocative.
In 1971, Taiwan lost its UN seat to China under its official name the Republic of China.
Beijing has repeatedly blocked subsequent efforts by Taiwan to rejoin the world body using the same name.
It has threatened to use force to retake Taiwan if the island makes moves towards declaring formal independence.