After receiving advice from intelligence and security agencies, the attorney-general Mark Dreyfus mandated a ban on the app on government devices that will be instituted "as soon as practicable".
It said exemptions would only be granted on a case-by-case basis with appropriate security mitigations in place.
Australia is part of the 'Five Eyes' intelligence-sharing group, which also includes the US, Canada, Britain and New Zealand.
The UK government imposed a similar ban on the social media platform last month after the app came under increasing scrutiny over its handling of user data.
Several public administrations raised concerns over the possibility that TikTok's owners ByteDance will be asked to share its data with the Chinese government, undermining Western security interests.
Bytedance has long maintained that it does not share data with the Chinese government and it is carrying out a project to store US user data in Texas, which it says will put it out China's reach.
Nevertheless, in December 2022 it admitted that it had used the app to spy on reporters as part of an attempt to track down the journalists' sources.
The Chinese government has reportedly been expanding its practice of taking minority stakes in private companies beyond those specialising in online news and content to firms possessing large amounts of key data.
The US has already banned the app on government phones and is considering expanding this rule nationwide to cover private citizens as well.
The proposed legislation would "block and prohibit all transactions" in the US by social media companies with at least one million monthly users that are based in, or under the "substantial influence" of, countries that are considered foreign adversaries, including China, Russia, Iran, North Korea, Cuba and Venezuela.
China has lashed out at the US for banning TikTok, saying it is an abuse of state power and is suppressing companies from other countries.
Meanwhile, in the UK, TikTok had been facing a fine of £27m from the Information Commissioner's Office (ICO), after the ICO said that more than one million children under 13 were using TikTok in 2020, despite the app's terms of use supposedly prohibiting this.
The ICO added that personal data belonging to those children was used without parental consent and that the company did not do enough to check who was using the social media app and take enough action to remove the underage children that were.
However, the ICO has now reduced TikTok's fine to £12.7m.
John Edwards, information commissioner, said: "There are laws in place to make sure our children are as safe in the digital world as they are in the physical world. TikTok did not abide by those laws.
"As a consequence, an estimated one million under 13s were inappropriately granted access to the platform, with TikTok collecting and using their personal data. That means that their data may have been used to track them and profile them, potentially delivering harmful, inappropriate content at their very next scroll.
"TikTok should have known better. TikTok should have done better. Our £12.7m fine reflects the serious impact their failures may have had."
TikTok said that it disagrees with the fine and is "considering next steps".
A spokesperson said: "TikTok is a platform for users aged 13 and over. We invest heavily to help keep under 13s off the platform and our 40,000 strong safety team works around the clock to help keep the platform safe for our community.
"While we disagree with the ICO's decision, which relates to May 2018-July 2020, we are pleased that the fine announced today has been reduced to under half the amount proposed last year. We will continue to review the decision and are considering next steps."
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