Well now that you mention it... I just had a look around and the first thing I noticed is that none of the Australian news sites are carrying this story. I got more suspicious when I realised most of the top google links are foreign blogs. It sounds like this story is a bit of an invention (at least, the facts don't seem to fit the story) and this site seems to be confirming that suspicion:
http://www.crikey.com.au/2010/01/29/has ... l-breasts/
On the other hand it does say naked images that appear to be underage must be RC (Refused Classification) so I guess it isn't all hot air. The odd thing is it looks like none of this is recent.
I used to buy "Barely Legal" when I was in my teens and I'm sure I've seen it at a newsagent in the last couple of years. It basically sounds like it's up to the classification board what is allowed and it probably always has been.
Having said that Labor are looking for any excuse to justify their Internet censorship scheme so I suppose "women that look underage" will be one of the reasons for blacklisting, whether the models are really underage or not.
Anyway, like the article says, "don't let facts get in the way of a good story".
Aussies to censor small breasts? - Page 4