"This exclusion has not been part of any government redress scheme or any redress scheme that I am aware of for institutional abuse or for that matter any Australian scheme that's been out there," Griffith University Professor Kathleen Daly told the inquiry on Friday.
All child sexual abuse survivors should be eligible for redress, the Anglican and Uniting churches and Salvation Army told the inquiry.
"It is well known and recognised by the royal commission that some survivors as a result of their abuse have engaged in abusive conduct themselves, including criminal conduct," their joint submission said.
"We believe the scheme needs to provide equal access and equal treatment to all survivors and not just particular classes of people," the Uniting Church's Rev John Cox told the public hearing.
The Catholic Church did not support the exclusion.
After consulting with the states, the federal government decided to exclude sex offenders and anyone jailed for five years or more for crimes such as murder or serious drug and fraud offences.
The scheme operator would have the discretion to determine whether survivors who are or who had been jailed were still eligible for redress on a case-by-case basis.
The operator would also be able "in exceptional cases" to block survivors convicted of lesser crimes if it is deemed to be otherwise contrary to prevailing community standards.
Knowmore legal service executive officer Warren Strange described the discretion as very broad, saying it was "exercisable really on grounds of ... some survivors (being) worthy of redress and others are not."
Others told the hearing the exclusion ignored the fact victims were children at the time of the abuse and created two classes of "deserving" and "undeserving".
Most states, churches and charities backed a truly national redress scheme but want outstanding issues resolved before making a final decision to opt-in.
Unless they opt-in by the July 1 start date, it will be a Commonwealth-only scheme covering 1000 of an estimated 60,000 institutional child sexual abuse survivors.
South Australia won't join because it has its own redress scheme, but intends to take steps to allow the state's non-government institutions to participate.