Transgender athletes should be included in high level women's sporting events, though they will have to undergo hormone suppression first, according to the country's top sporting body.
The Australian Sports Commission's latest gender-diverse inclusion document has endorsed testosterone limits for transwomen in elite sports.
The non-compulsory guidelines for national sporting bodies recommends transgender athletes maintain testosterone plasma levels less than 2.5 nanomoles per litre for the two years before competition, though this could change according to the demands of a sport.
Events that require less explosive or aerobic power may opt for a greater testosterone range.
Any athletes undertaking testosterone suppression should do so under medical supervision and in consultation with a specialist endocrinology professional.
Though LGBTQI organisations celebrated the criticism of blanket bans, reactions to hormone requirements were more tempered.
"While it is for the AIS to justify their testosterone requirements, it is reasonable to expect some criteria for participation at an elite level," Equality Australia CEO Anna Brown said.
"This is why we support the guidelines for recommending a case-by-case approach rather than a blanket ban."
Testosterone limits vary significantly across Australian sporting codes.
The AFL requires transwomen to have testosterone levels less than five nanomoles per litre for two years but also considers other physical factors like height and weight, while Cricket Australia limits trans athletes to 10 nanomoles per litre for one year before competition.
But previous attempts to regulate transgender athletes have placed burdens on cisgender women.
Two-time Olympic champion Caster Semenya, who is believed to have an intersex condition that causes her body to produce testosterone at a higher rate than most women, was barred from competing when World Athletics changed their rules on hormone levels in 2018.
The organisation specified that any athletes with "differences of sexual development" with levels of testosterone above five nanomoles per litre or with androgen-sensitivity would have to take medication to lower their hormone levels.
The South African athlete had taken similar medications between 2010 and 2015 but said they made her feel constantly sick.
She has not competed in her signature events since 2017.
The ASC's guidelines have warned national sporting organisations not to place blanket bans on transwomen in elite sports, bucking the trend of bans made by international sporting bodies.
Swimming's governing body FINA and the International Rugby League both banned transgender women from participating in high-level sport in 2022, while the World Athletics Council prohibited transgender athletes from female elite track and field competitions in March.
Within Australia, the country's top basketball body banned transgender athlete Lexi Rodgers from elite women's basketball in April, which prevented her from playing with the Kilsyth Cobras in the NBL1 South competition.
The commission says national organisations are required to comply with Australian law which specifically prevents discrimination.
"While a blanket or outright ban at international level may not violate the legal environment in which an international body operates, it may violate Australian law if improperly applied," the report said.
Olympic silver medallist and former swimmer Madeline Groves celebrated the ASC's stance.
"Sport exists to entertain and inspire the community; sports people are celebrated for their talent, hard work and dedication, and trans people are wholly capable of all of these things," she said.
"Trans people deserve to play sport like anyone else."
