Alright, so basically the biggest stumbling block is that Australia doesn't have an R18+ (Restricted, 18 years and older) classification for games. We do for other media, just not games: the concept being (originally, at any rate) that games are for kids and therefore an R18+ rating is unnecessary.
That leaves us with G (General), PG (Parental Guidance), M (Mature)... these are all just recommendations and the content itself is legally available to anyone who cares to get it. Then there's MA15+ (Mature Audience - Restricted) this is content that is legally restricted to viewers over 15 years old. Anything that doesn't fit in MA15+ or below gets dumped into RC (Refused Classification) and is legally unobtainable within Australia.
What makes a game fall into RC? Well, here's an excerpt from the classification code:
a) depict, express or otherwise deal with matters of sex, drug misuse or addiction, crime, cruelty, violence or revolting or abhorrent phenomena in such a way that they offend against the standards of morality, decency and propriety generally accepted by reasonable adults to the extent that they should not be classified; or
(b) describe or depict in a way that is likely to cause offence to a reasonable adult, a person who is, or appears to be, a child under 18 (whether the person is engaged in sexual activity or not); or
(c) promote, incite or instruct in matters of crime or violence; or
(d) are unsuitable for a minor to see or play
Nice and vague, eh?
Anyhoo - there's a move to introduce an R18+ classification for games (see here [http://www.ag.gov.au/gamesclassification] for more info) but in order for it to go through it has to be approved unanimously by all the states' Attorney-General one of whom, Michael Atkinson, I think would rather lose his left testicle than ever see it actually happen.
So, that's Australia game classication problem in a nutshell.