vp3,
I may have a similar situation here. at the time of application, I ticked my partner's English as "functional". But as a non English speaker, he is not quite sure about his capability of obtaining that 4.5, and maybe doesn't want to take that test.
My CO has been assigned and in the requested doc list he sent to me, regarding the Partner English Evidence, it says that I can inform them if we don't want to sit the test. We will then pay for the second installment fee AUD4050.
But as precious posts suggested, as long as you can provide the CO with evidence of test booking before the end of first 28 days, you should have no problem of getting an extension for your wife to better prepare for the test.