Lamar Aaron Ahchee, 43, from Cairns in north Queensland, was arrested in May when police raided his rented house near Kuta beach.
They seized 1.7 kilograms of cocaine in 206 clip plastic bags, along with a digital scale and mobile phone.
The arrest followed an investigation conducted by Bali police anti-drug surveillance teams who reported the man had received two suspicious packages sent by mail from England.
He was suspected of importing or distributing narcotics, according to Indonesian police.
Judge Tjokorda Putra Budi Pastima, who presided over a three-judge panel, on Thursday announced a sentence of 12 years imprisonment and a fine of two billion rupiah ($A180,000).
The verdict was harsher than the prosecutor's demand for a nine-year prison sentence.
During the hearing, Ahchee denied that he knew the package he received was cocaine.
The judges considered several factors that aggravated the sentence, including the fact that Ahchee had received a large amount of cocaine, which could harm many people and damage the quality and safety of tourism in Bali, Pastima said.
The judge also said the defendant was evasive and tried to obscure the facts.
The United Nations Office on Drugs and Crime says Indonesia is a major drug-smuggling hub despite having some of the strictest drug laws in the world, in part because international drug syndicates target its young population.
About 530 people, including 96 foreigners, are on death row in Indonesia, mostly for drug-related crimes, the Ministry of Immigration and Corrections' data showed.
Indonesia's last executions, of an Indonesian and three foreigners, were carried out in July 2016.
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