Sometimes with homophobia, there is a phobia about it.

Issie Soudy, a VCE student at Oberon High School in Geelong, made a documentary about homophobia called Homo and was excited about screening it at the school's arts and technology night last year.

But the 17-year-old, who is exploring her sexuality, was disappointed to have the documentary's artistic merit questioned and be told by some staff that it would be offensive to the school community and families.

Meetings were held and the 25-minute documentary with mild language but no nudity was screened, albeit in a separate room. "I wasn't happy with the way it was handled," Issie said and has the support of her mother, Emma Rutherford.

The student who has turned teacher to educate the community about equality was disappointed that her film didn't receive more exposure but now it will because she is a finalist in the Midsumma Festival's inaugural art prize sponsored by Australia Post as part of its commitment to diversity and inclusion.

The school's assistant principal, Josh Baker, told Fairfax Media that because young children were attending the arts night, the school thought it was appropriate to screen the documentary in a different room so people had a choice to view it or not.

"We want our kids' artwork to be controversial because that it was art is," Mr Baker said. "I think it's OK to push the boundaries."

And he stressed: "It's a fantastic doco – I've seen it."

The Victorian government tackles homophobia and supports gay and lesbian students through its Bully Stoppers program and the Safe Schools Coalition. About 10 per cent of students identify as gay, lesbian or bisexual and there are abundant resources such as the "OMG I'm Queer" booklet.

Issie, who is starting her final year of VCE and is a vice-captain, has been making short films since she was nine. For Homo, she interviewed friends aged 13 to 50 who had experienced homophobia, filmed them on her Canon camera and made the finishing touches on her Mac's iMovie.

"I feel privileged that these people trusted me and allowed me into some of their experiences," she said.

Empowered by her documentary, when school resumes she plans to start a support group for lesbian, gay, bisexual, transgender and intersex students.

"Coming from a small town, people aren't open to things. People need to be more educated, especially people my age. No one fits a gay or lesbian stereotype."

Issie, an aspiring film-maker, is competing against established artists in Midsumma's arts prize that is themed "Identities". The winner of the $2000 major prize and $500 people's choice award will be crowned at the opening night on January 22 at the 69 Gallery Smith Street Gallery in Fitzroy.

Australia Post's executive general manager of postal and e-commerce services, Christine Corbett, said the arts prize was a great opportunity for emerging and established artists from diverse backgrounds to explore topical issues.

"LGBTI inclusion is part of our Diversity and Inclusion strategy at Australia Post. Our employees across all our workplaces are encouraged and actively supported to champion workplace diversity," she said.

Midsumma offers a smorgasbord of bouffanted and buffed frolicking over the rainbow until February 7.

Photographer Lavina Harte has an Equal Love in Melbourne exhibition at the 86 Bar in Collingwood on February 4 that is aimed at giving a gentle pat on the back to people coming out as gay or lesbian.

"As a gay woman, I felt that it was important to showcase the community and produce something, that to me, will help people that may be struggling with coming out or getting the acceptance from people that are dear to them in life," Ms Harte said.

The Midsumma arts prize will be exhibited from January 22-February 6 at the 69 Smith Street Gallery in Fitzroy.