Former home affairs minister Karen Andrews wants the government to go further and label the Islamic Revolutionary Guard Corps as a terrorist organisation.
"The Islamic Republic of Iran has a well-known history of harassing, arresting and torturing family members of any Iranians who criticise the brutality of the regime," Ms Andrews told parliament on Monday.
"Listing the IRGC as a terrorist organisation would be a powerful signal to those who threaten our way of life."
The call comes after widespread protests by women across Iran, following the death of Mahsa Amini.
The 22-year-old was arrested in September last year for "improperly" wearing her hijab, and died in custody.
Women and girls attending school in Iran were reportedly poisoned while protesters have been executed, Ms Andrews said.
Foreign Minister Penny Wong earlier announced Magnitsky-style financial sanctions and travel bans had been issued against 14 Iranian individuals, along with 14 entities.
The sanctions also extend to senior law enforcement officials and military figures, such as those within the Islamic Revolutionary Guard Corps.
Ms Andrews' condemnation of the Iranian regime was welcomed by Labor MPs but backbencher Julian Hill said a terrorist label would have "no practical effect".
"Politicians for decades have danced around and listed things as terrorist organisations. That has little to no practical effect in the real world," he said.
"The things which hurt these people are the sanctions."
Mr Hill said terrorist listings under the Australian Criminal Code apply to non-state actors, not state actors like the IRGC.
But opposition foreign affairs spokesman Simon Birmingham said the government had been slow to respond to a Senate committee which recommended the sanctions more than seven weeks ago.
He said the coalition would offer bipartisan support to strengthen Australia's condemnation of human rights abuses being carried out by the Iranian regime.
Further sanctions and travel bans have also been placed against 13 people and another entity for supplying drones to Russia which had been used to target Ukrainian civilians and infrastructure during the invasion.
"This listing demonstrates there will be consequences for those who provide material support to Russia," Senator Wong said in a statement.
"Australia stands with the people of Iran and with the people of Ukraine."
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