People could soon change the gender on their birth certificates without having to undergo sex reassignment surgery.
The Victorian attorney-general's department has signalled that it is working to "remove barriers to new birth certificates for trans, gender diverse and intersex Victorians", in line with a Victorian Labor election commitment.
In a letter to a parent of a transgender child, the attorney-general's chief of staff advised that the office was "progressing work to address discrimination in Victoria's birth certificate laws".
The current laws are complex and confusing. If a person wants to change the gender on their certificate, they must be unmarried, 18 years of age or over, and to have undergone sex reassignment surgery.
The reforms will have significant implications for transgender kids, as some state schools have refused to allow a student to transition because their gender did not match their birth certificate.
Chair of Transgender Victoria Brenda Appleton, who also co-chairs the government's LGBTI Taskforce, said the process of changing one's gender should be as simple as changing one's name.
"The birth certificate is a fundamental part of your identity ... you won't want to use it if it doesn't contain correct information.
"It will make life so much easier ... in cases when you need to go to the bank, renew your driver's license, or offer proof of identity."
Ms Appleton is advising the government to allow people to be recorded as male, female, or to fill in their gender identity in a blank space.
The government is yet to provide any detail on how they will consider recording a person's gender.
Karyn Walker had to pull her transgender child out of a state school in Melbourne's southeast, after the school would not allow her child to transition, because the gender would be different to the sex recorded on her certificate.
It was hurtful for the six-year-old daughter to hear her mother explain to doctors, teachers and other service providers about the child's gender transition, Ms Walker said.
"It's not a choice, this is who she is ... other people don't always understand, it's not always an easy discussion.
"With these changes I will be able to say my child is a girl and the document supports that, and we will be able to move forward with our lives."
It follows changes in the ACT in 2014 which gave transgender people the right to change the sex on their birth certificate without surgery, enabling them to identify as male, female or "X".
It also comes as the leader of a major political party in Scotland - Nicola Sturgeon of the Scottish National Party - flagged that she would change the country's gender recognition laws.
Anna Brown, who is director of Advocacy and Strategic Litigation at the Human Rights Law Centre, said it was appropriate to allow for changes to birth certificates, given that in 2014, a high court unanimously found that a transgender person could register as neither a man nor a woman, and the Australian government had also brought in new passport rules allowing citizens to nominate their gender without surgery in 2011.
Ms Brown said the Victorian government should not adopt the same policy in the ACT, which requires a doctor or psychologist to certify a person has received "appropriate clinical treatment" before nominating their gender on their birth certificate.
"Being transgender is not an illness. The idea that a medical practitioner can or should 'verify' an individual's own sense of their gender identity is not only incorrect but also damaging to a person's sense of self."
Ms Brown said service providers unnecessarily requested information about people's gender, and cited the Australian government's guidelines on recognition of sex and gender, which stated that gender should only be collected if it is directly related to one or more of the agency's functions.