The proposed laws would attach a six-year prison sentence to adults found to have shared "deepfake" sexually explicit images without consent and a seven-year term would apply if they created and distributed the image.
The proposed changes to criminal laws are being considered on Tuesday by a Senate committee chaired by Labor Senator Nita Green.
The deepfakes bill aims to curb the use of new technology to nefariously digitally alter an image of a person or their body to make a sexually explicit image.
This can be done by using artificial intelligence to generate an image based on a person's photo or to superimpose their face onto pornographic material.
Laws could help reduce gender-based violence, Labor Senator Nita Green says. (Mick Tsikas/AAP PHOTOS)
Ms Green said laws were not explicit enough to criminalise deepfakes.
"AI technology can be of enormous benefit, but it has also seen an explosion in the sharing of fake non-consensual images, which can have long-lasting impacts on victims," the Labor senator told AAP.
"We know that most deepfakes depict women and girls and that's why this is an important measure to take to reduce gender-based violence."
Rape and sexual assault prevention organisations, legal and criminal experts, the eSafety Commissioner, law enforcement and federal government agencies will give evidence at the hearing into the legislation.
There was significant concern globally about the rise of sexually explicit deepfakes, the Australian Federal Police Association said.
There were challenges in prosecuting offenders, it said.
"With the creation of deepfake child exploitation material increasing, the role of law enforcement and identifying a victim is becoming exponentially more difficult," it said in a submission to the inquiry.
"Police must first determine who the victim is (and whether they are actually a real person).
"How long do investigators spend trying to find a child who potentially doesn't even exist or who had their likeness stolen but has ultimately not been abused themselves?"
Relationships Australia wants the bill to include a definition of consent that aligns with an affirmative consent model, where it had to be expressly given rather than a person simply not saying "no".
"Consent (or the lack of it) becomes the lynchpin of the offending conduct. However, despite its significance, the bill does not seek to define consent," it said in a submission.
"The absence of a definition may undermine effective enforcement of the proposed offences."
The laws addressed "the urgent and collective need to respond to the growing challenges associated with artificially generated sexual material", the Attorney-General's department said.
"The sharing without consent of digitally created or altered sexual material can be a method of degrading, humiliating and dehumanising victims," the department said.
"Such acts are overwhelmingly targeted towards women and girls, perpetuating harmful gender stereotypes and contributing to gender-based violence."
The parliamentary committee will report by August 8.
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