Sanctions and travel bans will target eight members of the Russian Federation's security council, while existing sanctions in place over past Russian aggression will be expanded.
Russian banks have also been targeted.
Prime Minister Scott Morrison said he expects further tranches of sanctions that will target more individuals.
Vladimir Putin has ordered Russian troops into eastern Ukraine in a move he said was aimed at keeping the peace after Moscow recognised the separatist regions of Donetsk and Luhansk as independent.
US President Joe Biden has described the action as the beginning of a Russian invasion of Ukraine.
Mr Morrison, who convened cabinet's national security committee on Wednesday, said Russia needed to understand the world's condemnation of its decision.
"The invasion of Ukraine has effectively already begun," Mr Morrison told reporters in Sydney.
"Australians always stand up to bullies and we will be standing up to Russia."
Sanctions by the United States and United Kingdom will target Russian billionaires and financial institutions, while Germany put the brakes on a new gas pipeline.
Australia has ruled out direct military assistance and is supporting Ukraine's cyber-capability. It has left the door open for technical military support but the prime minister declined to elaborate on what the term meant.
Home Affairs Minister Karen Andrews, who met her counterparts in the Five Eyes intelligence alliance over the Ukraine issue, has voiced concerns about a potential cyber attack on Australian critical infrastructure.
"That doesn't mean we will go lightly in our response to Russia, because this behaviour needs to be called out," she said.
The head of the Ukrainian embassy in Canberra, Volodymyr Shalkivskyi, urged Western nations to be unified in their sanctions.
"We need Australia to join its partners in applying additional sanctions against Russia, and we also hope that the Australian government will provide additional assistance," he told Sky News.
"Sanctions have to be targeted in the most vulnerable areas of the Russian economy, and everyone knows the most sacred area of the Russian economy is energy."
However, Mr Shalkivskyi said even if Ukraine announced it would no longer join NATO there would still be Russian aggression in the region. Moscow has repeatedly opposed Kyiv joining the security alliance.
"It would not change anything because it's not about NATO it's about the independence of Ukraine ... (Putin) questions our right to be independent," he said.
"Even if we refuse or put out the agenda of NATO membership, the simple factor of the independence of Ukraine will be an irritation for the Kremlin for years to come."
Russia's parliament approved treaties with Donetsk and Luhansk a day after President Vladimir Putin recognised their independence.
Foreign Minister Marise Payne said she would turn her mind to how to deal with Russian diplomats in Australia "at an appropriate time".
Opposition Leader Anthony Albanese said Western countries needed to be united with sanctions against Russia and that Australia had to join in implementing them.
"For it to be effective, it has got to be as wide, with as broad a participation as possible," he told reporters in Tasmania.
"The Australian government must join this action, the west must stand united, democratic nations need to call this out for what it is.
"This isn't a peacekeeping force, but a peace-breaking force into sovereign areas of Ukraine."
However, former British ambassador to Russia Anthony Brenton told the ABC previous economic sanctions have had little effect against the country, only knocking off around 0.2 per cent of GDP each year.
"They have certainly not been effective ... and while they've had little economic effect they have had zero policy effect," he said.
"The Russians gather around their president when pressure from outside is coming at them and they've been pretty tough in their refusal to bend to Western economic pressure.
"I would expect exactly the same in the upcoming round of sanctions now."
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