The Melbourne race was dominated by three in-race red flags, leading to lengthy delays and chaotic standing restarts, the latter of which eliminated several drivers.
On lap 7, Alex Albon's crash brought out the first safety car of the race, which prompted Mercedes' race leader George Russell to pit for hard tyres.
But soon after his pitstop, which dropped him to seventh, the red flag came out and gave drivers in front of him the chance to change tyres in the pitlane without cost.
Speaking straight after his retirement Russell thought the red flag, which was thrown to clean up gravel and debris, was "totally unnecessary".
The second red flag for Kevin Magnussen's crash in Turn 2 was also a point of debate, with several drivers including Verstappen and McLaren's Lando Norris not understanding why it was called.
While Wolff was fine with the current red flag restart rules as they are, he thinks F1 needs to do a better job defining when a race must be stopped and when a physical or virtual safety car is enough to clear an incident safely.
"Both red flags we didn't see coming," Wolff said. "I think [standing] restarts are a great entertainment factor.
"We just need to understand going forward when are red flags being put out, and what is a safety car or VSC? I think in those incidents you could have applied either.
"I'm fine whether you call a VSC or safety car, or you red flag it, as long as we understand in terms of us being able to plan a little bit.
"Let's define all together what is a VSC, what is a safety car and what is a red flag."
While Russell ultimately retired with a fiery engine failure, at the time the red flag denied Mercedes a chance to split strategies against the solitary Red Bull of Max Verstappen up front.
Hamilton opted to stay out on his mediums and inherit the lead ahead of the Dutchman, whereas Russell's switch to the favoured hard tyre only cost him limited track position.
Wolff insisted the decision to pit Russell was correct and would have allowed the Briton to be a factor at the front towards the end.
"The strategy call with George was absolutely the right one, splitting the cars," he said. "I think he would have had a real go at being very much at the front, so that's a shame."
