In conjunction with a rhythmically-moving second banner, the display appeared to show a man resembling Sydney FC coach Graham Arnold performing oral sex.
Wanderers said they would ban the 14, er, members of the notorious Red & Black Bloc (RBB) fan group for 18 months across all competitions after the banner was hoisted on Saturday.
The club were subsequently fined AU$20,000 (£12,352) on Thursday.
Western Sydney Wanderers CEO John Tsatsimas said: "This incident involved key leaders of the RBB who have shown no remorse for their actions of bringing our club and the game of football into disrepute and have continued to flaunt their disdain for the club... on social media.”
"As a club we have had enough and have put the entire group on notice.”
The Wanderers said the banned spectators will also have to undergo a social inclusion programme before their suspensions can be lifted.
VIDEO To see the banner in action, follow the link to this Not Safe For Work tweet - but don't say we didn't warn you.
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