Tasmania is poised to become to first state to make it optional to include gender on birth certificates, but the prime minister has slammed the push as "ridiculous".
Landmark transgender rights reforms, put forward by the Labor opposition and the Greens, passed the Tasmanian lower house late on Tuesday night.
The changes were passed against the state government's wishes by the casting vote of rogue Liberal Speaker Sue Hickey, who voted against her party.
They've been hailed by transgender right groups but Scott Morrison and religious groups have voiced opposition.
"Labor's plan to remove gender from birth certificates in Tasmania is ridiculous," Mr Morrison tweeted on Wednesday.
"Bill Shorten should step up and commit to put motion to ALP Federal Conference to outlaw it."
Mr Shorten said he had no plans to change the way birth certificates are filled out.
The legislation allows people aged 16 or older to change the gender on their birth certificate by filling out a statutory declaration.
It also allows parents to decide whether their child's gender is recorded on birth certificates.
An anti-discrimination law amendment, designed to ensure the correct use of transgender people's names and honorifics, was also passed.
"It's going to make our lives so much easier and so much safer," Roen Meijers, spokesperson for Transforming Tasmania, a transgender and gender-diverse rights group, told AAP.
"When young people want to apply for jobs, and they have to show their birth certificate to show their age, they won't immediately be outed to everyone they're working with."
State Health Minister Michael Ferguson accused Labor and the Greens of conducting a social experiment on kids.
Ms Hickey labelled Mr Ferguson's comments disappointing and accused Mr Morrison of making judgments on the run.
"I think we just need to get with the times," she told reporters.
"That's the kind of stuff that has been very harmful to the transgender community.
"People have to realise the Liberal Party has a very strong, right-wing Christian element."
The bill must still pass Tasmania's 15-member upper house, nine of whom are independents.
With Labor's four upper house members likely to vote for the legislation, only four independents will need to support it for it to become law.
The state government wants the amendments referred to the Tasmania Law Reform Institute, with Attorney-General Elise Archer describing them as "deeply flawed".
The Australian Christian Lobby said the removal of gender on birth certificates was ignoring biological truths.
Labor MP Ella Haddad and Greens leader Cassy O'Connor hugged in the House of Assembly when the legislation passed.
"These changes will make people, who we should all care about, feel happier, safer and more included," Ms O'Connor told parliament.
The changes were attached to a bill introduced by the government that would stop people who change genders from being forced to divorce, bringing state laws in line with federal legislation.
Under the amendments, the sex of children would still be recorded on medical records.
Australian Associated Press