Kotaku AU recently tracked down this quote posted on an Australian telecommunications news site.

Okay guys, I have some news for you regarding what was edited from the AU release. I just gave Take2 a call (a friggin expensive 1902 number!) and this is exactly what I was told:

"Well in regards to what Rockstar have removed for the Australian release, as far as we're aware there was only one sexually violent cut-scene which Rockstar felt would cause the game to be Refused Classification. Unfortunately we're not able to go into specifics until after the game has been released but I can tell you that the scene involves a weapon being inserted into an enemies private area during a mission where Niko is taking revenge after one of his close friends was forced into sexual intercourse during his stay in prison."

Seriously I thought he was joking ....I was like LOL you're joking right? He says "No. This is what Rockstar felt needed to be removed from the game for it's Australian release. We were recently given permission to release this information because as we understand, Rockstar originally made a press release stating that the game would be released uncut world wide. We felt it would be misleading not to release the information".

Interesting, reminds me of the 'manipulation of testicals using a weapon' scene that got Manhunt 2 in a lot of trouble originally. Please note that until Rockstar or Take-Two confirms something officially, this is still just a rumor.

Source: Kotaku AU