The TGA's decision now requires approval from all Australian state and territory governments.
But LGBTIQ+ advocates have called for the complete removal of the restriction on gay men donating blood, describing the reduction in time as a "window dressing".
"The new three-month celibacy rule will not significantly increase the amount of safe blood available for transfusion because it leaves most gay men who are safe to give blood still unable to donate," Rodney Croome, spokesperson for LGBTIQ+ advocacy group just.equal, said.
"At a time of crisis when blood shortages are looming, it is vital that all Australians who are not at risk of passing on blood-borne diseases are able to donate, including those gay men who are not at risk."
Mr Croome said maintaining a "celibacy period" for all sexually-active gay men was a remnant of the 1980s, when he said HIV transmission was less understood and "being gay was synonymous with having AIDS".
The TGA said its decision was based on "risk analysis ... which demonstrates that recipient safety remains within the accepted risk tolerance parameters".
The United Kingdom, Canada, and the United States have all recently reduced the deferral period - the time that donors are postponed from donating after the sexual activity - for gay men to three months.
Blood donations 'absolutely vital'
Meanwhile, as fewer people donate blood due to the coronavirus social distancing restrictions in place across the country, the Australian Red Cross has called on people to continue donating blood, which it says is an "absolutely vital" service.
The Red Cross, which lodged the submission with the TGA, said deferral policies are regularly reviewed and supported by up-to-date clinical and scientific evidence.
Source: Australian Red Cross Lifeblood
"Lifeblood would like to make it easier for all Australians to give blood, while ensuring Australia’s blood and blood products are as safe as possible for blood recipients," the statement read.
The TGA's proposed changes currently only apply to whole blood donations, with plasma donors still subject to the 12-month deferral period.
People who are undertaking pre-exposure HIV prevention treatment, known as PrEP, will also need to wait a year after treatment before giving blood.
There have been no confirmed reports of COVID-19 being transmitted by blood transfusion.
"Our strict screening process means we don’t allow people who are unwell to donate blood," the Red Cross said.
The Department of Health has been contacted for comment.
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