The annual four-day camping festival, which was first held in 1994, is meant to kick off on December 28.
Fire crews are battling a 2,000-hectare bushfire burning along the Great Ocean Road, and residents in Lorne have been urged to evacuate the town.
The festival site is in dense bushland about 15 minutes from the town centre.
“We are working with the CFA, fire authorities and emergency services to stay across the current situation,” organisers said in a statement.
“We have a meeting scheduled with emergency services at 12 noon [on Saturday]. We will make a final decision on how the show will progress from there.
“We will update you all with further information as soon as it comes to hand.”
More than 15,000 people are expected to bring in the new year at the event.
This year’s acts include international acts Bloc Party, Foals, the Wombats and local favourites Courtney Barnett and Birds of Tokyo.
Simultaneous events are also held at Marion Bay in Tasmania and Byron Bay in New South Wales.