"Mooning or streaking," which was previously punishable under other laws, has now been specifically named as offence in the amendment of legislation that also includes sexual crimes.
The revised Summary Offences Act 1966 states that "behaviour that is indecent, offensive or insulting includes behaviour that involves a person exposing (to any extent) the person's anal or genital region" and mentions "mooning or streaking" as an example of such an offence.
First-time offenders could face two months in jail while repeat offenders could be locked up for six months, according to the legislation.
Victoria's Attorney General Martin Pakula told local 3AW radio that it was always an offence but the legislation separates less serious indecent exposure from more serious sexual exposure.
"Sexual exposure is of course a much more serious offence. We don't want a situation where someone who might streak at the cricket is funnelled into the same category as someone who might jump out in front of a 13-year-old girl and flash," he said on Monday.
"They are very different types of offences and the legislation for the first time makes that clear."
Pakula said if it was not mentioned as an offence, "you could have people simply doing it everyday with no possibility of any kind of sanction."
The same act also outlaws singing "an obscene song or ballad" and behaving in a "riotous, indecent, offensive or insulting manner."
At an annual event in February, local residents of the town of Livingstone in Australia's Northern Territory welcome visitors coming by the luxury Ghan train from Adelaide to Darwin by "mooning" them.