Armour, who tied for second here last year, posted a 5-under 67, while Levin managed a 4-under 68. The pair is through 36 holes at 7-under-par 137.
Peter Tomasulo carded a 2-under 70 and Michael Sim shot a 3-under 69 to share third place at minus-6 at Royal Adelaide Golf Club.
Armour parred his first hole, but picked up a pair of strokes at the par-5 second. He holed a wedge from 80 yards for an eagle, then drained a 10-foot birdie putt at the fourth.
'I started off real well by going 3-under through four holes,' said Armour. 'The shot I hit on No. 2 could have very easily missed the cup and rolled 40 feet by.'
Armour collected one more birdie on the outward nine, a six-footer at the eighth. He cooled around the turn with five consecutive pars, but dropped a shot with a bogey at No. 14.
The man who will turn 30 in 10 days quickly atoned for his mistake at 14. He two-putted for a birdie at the par-five 15th and reached 7-under par with a four-foot birdie putt at the 17th.
'I feel good down here,' said Armour. 'The course suits my eye. The course is in such great shape. The greens are very good. You feel like you should make some putts.'
Levin began on the back nine Friday and parred his first four holes. He hit a nine-iron to 40 feet at the 14th and sank the long birdie try. Levin made it two in a row with an eight-footer at the 15th.
Levin recorded his first birdie on the second nine with a 20-footer at the second. He bogeyed the third, but made up the shot when his 14-foot birdie putt at the fifth fell into the hole.
He joined Armour in the lead with two-putt birdie from 20 feet at the ninth.
'I played well today and I hit the ball well,' said Levin, who was the low amateur at the 2004 U.S. Open. 'I wanted to be patient, but aggressive. There are holes out here you just can't go for.'
First-round leader Gavin Flint struggled on Friday. He shot a 3-over 75 and is tied for fifth place with Bradley Iles (73), Jarrod Lyle (70), Michael Long (73) and Jason Buha (70) at minus-5.
Adam Crawford (73) and John Merrick (72) share 10th at 4-under-par 140.
Kevin Stadler, who won last week's Johnnie Walker Classic on the European Tour, posted a 1-over 73 and is part of a group tied for 12th at minus-3.
The 36-hole cut fell at 1-over-par 145 and 61 players advanced to the weekend.