China and Iran are already at a level four which warns people against travelling.
It comes after a man from Perth became the first Australian to die from the deadly flu.
James Kwan died in intensive care after he contracted COVID-19 while on board the Diamond Princess cruise ship.
He was one of 170 passengers evacuated from the vessel in Japan, before he was transported to a quarantine facility in Darwin.
Announcing the new travel warning on Monday, health minister Greg Hunt said 10 towns in Italy's northern provinces are particularly at risk.
He said: 'If you are returning from Italy or South Korea and you work as a health care worker or a residential aged care worker you should not attend your regular work for 14 days.'
The towns in Italy include Codogno, Castiglione d’Adda, Casalpusterlengo, Fombio, Maleo, Somaglia, Bertonico, Terranova dei Passerini, Castelgerundo and San Fiorano in Lombardy and Vo’ Euganeo in Veneto.
Italy has reported a 50% increase in the number of diagnoses, with 1,694 confirmed cases.
Several towns have been put on lockdown in a bid to curb the spread, effectively forcing over 100,000 into quarantine.