Radicalised children as young as 14 could be detained without a court order for up to 36 hours if intelligence shows there is a threat of an imminent attack.
The Andrews government also wants to broaden its counter-terror laws beyond Islamic extremism to better target right-wing and left-wing extremists who are suspected of plotting violence.
It will also seek national support to amend the definition of a "terrorist act" to remove motive as an essential element.
Post-sentence supervision of extremists who have completed their prison sentences and been released into the community will also be made more stringent.
The tougher laws will form part of a number of measures to counter violent extremism, recommended by former Victoria Police chief Ken Lay and former Supreme Court of Appeal Justice David Harper, in a report unveiled by the government on Monday morning.
It is the second report the two men have prepared on strengthening counter-terror laws.
"We live in a dynamic environment, we live among many different threats and challenges," Premier Daniel Andrews said. "The key point here is to make the changes necessary to keep Victorians safe."
He said events interstate had proved radicalised children as young as 14 could commit violent acts.
"We'd all prefer not to have to make changes like this but this is the threat we face, this is the world that we live in and to do anything less would be to compromise the safety of tens of thousands of Victorians in order to notionally protect the civil liberties of a very small number of people," Mr Andrews said.
The report has 26 recommendations, all of which the government has accepted in principle.
It includes extending the preventative detention order scheme to include children as young as 14, instead of 16 under current laws, who could be held without a Supreme Court order for up to 36 hours.
The Commissioner for Children would oversee the order.
An adult can be held for up to four days under the same scheme.
Radicalised and violent people would also be ordered to participate in disengagement programs following a court order by the Chief Commissioner of Police.
Mr Andrews said following the attack, the government commissioned Mr Lay and Mr Harper to review counter-terrorism laws and systems "to see whether there were any gaps".
Mr Lay said the review found the threat of violent Islamic extremism was well understood but that there was less understanding of the potential threat of right and left extremism.
"There are definitely signs that there are groups being organised and we need to understand exactly what the risks are, what we can put in place to prevent the risks to the community," Mr Lay said.
The review also recommended the government research the effects of Islamophobia on Victoria's Muslim population.
The government committed $9.4 million towards tackling violent extremism by expanding community support groups, community grants and a new think-tank on social cohesion.
A Law Institute of Victoria spokesman said there were serious question marks about proposed laws to hold children as young as 14 in detention without charge.
"Stronger safeguards, including strict oversight from the courts, need to be in place to protect children if they are to be held in custody under these proposed new terrorism laws," the spokesman said.