Mick Fuller, commissioner of state police, said the change was needed to correct a "grey area".
"When you get in a situation like with Lindt and you have a sniper who is sitting 300m away looking through a scope, at the moment, they have to determine in their own minds whether they have the legal ability to use lethal force," Fuller told reporters.
"If it is uncertain, it is understandable an officer will hesitate."
Police waited more than 16 hours before storming the Lindt Cafe, and then only after the attacker had killed a hostage. Police killed the attacker but a second hostage was also killed by ricocheting fragments of a bullet fired by police.
A coroner said last month police had failed to respond quickly enough.
The cafe siege, which began on December 15, 2014, was Australia's most deadly violence inspired by Isis (Islamic State) militants.