People who have sex outside of marriage in popular tourist spot Bali could face up to a year in prison if proposed new laws pass. 

Indonesia is poised to pass a new penal code that criminalises consensual sex outside marriage and introduce stiff penalties for insulting the President's dignity.

Indonesia is the world's most populous Muslim majority country and has substantial Christian, Hindu and Buddhist minorities, but has seen a recent trend towards deeper religious piety and conservative Islamic activism.

The new criminal code is due to be adopted in the next week after parliament and the government agreed a final draft.

The laws would cover Bali, which is a popular holiday spot for young people, including Instagram couple Kelly and Cody, who were criticised in April for posting a picture of themselves kissing on the edge of an infinity pool in Bali. 

Lawmakers told Reuters that the new penal code, which would replace a Dutch colonial-era set of laws, was a long-overdue expression of Indonesian independence and religiosity.

"The state must protect citizens from behaviour that is contrary to the supreme precepts of God," said Nasir Djamil, a politician from the Prosperous Justice Party.

He said leaders of all religions had been consulted on the changes given that Indonesia's founding ideology was based on belief in God.

Under the proposed laws, unmarried couples who "live together as a husband and wife" could be jailed for six months or face a maximum fine of 10 million rupiah ($A1045), which is three months' salary for many Indonesians.

A prosecution can proceed if a village chief, who heads the lowest tier of government, files a complaint with police, and parents or children of the accused do not object. Parents, children and spouses can also lodge a complaint.

The inclusion of the new power for village chiefs was warranted because "the victim of adultery is also society", another lawmaker, Teuku Taufiqulhadi, said.

The Institute for Criminal Justice Reform, an NGO, said millions of Indonesians could be ensnared by the new laws. It noted a study indicating that 40 per cent of Indonesian adolescents engaged in pre-marital sexual activity.

"Across the board, this is a ratcheting up of conservatism. It's extremely regressive," said Tim Lindsey, director of the University of Melbourne's Centre for Indonesian Law, Islam and Society.

A maximum one-year prison term also can be applied to a person who has sex with someone who is not their spouse and a close family member lodges a complaint.

The law also impacts homosexuals as gay marriage is not recognised in Indonesia.