An inquiry into foreign interference found popular platforms were being used to watch and gather information on people, repress and threaten diaspora communities and interfere with elections to promote preferred candidates and create disunity and division.
The targeted communities include Iranians, Tibetans, Chinese and Ukrainians.
The Senate committee recommended the government require all social media platforms operating in Australia to meet minimum transparency principles, including labelling state-affiliated accounts, disclosing any directions they receive from governments and being open about accounts they censor or take down.
It also recommends extending the TikTok ban on government devices to include contractors and the work devices of people who work for nationally significant systems.
A new dedicated office to combat cyber foreign interference was also proposed.
Australian Signals Directorate acting director-general Abigail Bradshaw said the decision to ban TikTok from government devices was because the information collected was able to create "quite a unique fingerprint" of the user.
She said the popular social media app collected phone numbers, contacts, IP addresses and SIM card numbers.
TikTok officials conceded serious changes were needed after reports the company spied on United States journalists following negative stories.
The committee also called for new strategies to counter misinformation and disinformation in the Indo-Pacific and empower foreign language journalists to target the malicious activity on in-language posts and platforms.
Committee chair and opposition home affairs spokesman James Paterson said Australia needed to stay ahead of the threat being posed through foreign media.
He said authoritarian nations engaged in foreign interference through popular social media platforms against a backdrop of increasing regional tensions.
"Perpetrating states use these platforms to skew public debate, undermine trust in democratic institutions, and peddle false narratives," he told the Senate on Tuesday.
"Social media is the place where news is reported, contentious issues are debated, consensus is formed, and public policy decisions are shaped.
"The health of these forums directly affects the health of our nation (and) foreign authoritarian states know this."
Senator Paterson said emerging technologies like artificial intelligence was making foreign interference easier and Australia needed to develop the capability to counter the threat in real time.
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