The Greens have gone one step further, proposing amendments that would remove the requirement to list a gender on a birth certificate at all.
Tasmanian Greens leader Cassy O'Connor said the current laws mean transgender people must undergo invasive reproductive surgery in order to change their birth certificate to reflect their identity.
"For a young transgender man, for example, who wants his birth documents to reflect who he really is, has to have a hysterectomy under the law," Ms O'Connor said.
Ms O'Connor, whose son Jasper has begun his transition 18 months ago, said gender markers on birth certificates are a form of discrimination and several jurisdictions around the world have removed them.
"On passports we have an ‘M’, ‘F’ or ‘X’. There’s a growing understanding that this an area of the law that needs reform.”
Transgender activist Martine Delaney said the gender requirement caused unnecessary distress, citing the example of a 15-year-old girl looking for part-time work.
"Because of her age and the laws around employment, she has to produce a birth certificate.
"Her birth certificate still lists her as male, so it creates a problem for her in just trying to go about things that other people don't have to think about it.
"When it comes to getting a job she has to explain herself to the world and it's unnecessary."
The plan has the backing of Labor but is opposed by the Tasmanian Liberal Government.
Attorney-General Elise Archer said the Tasmanian people should be consulted before changing their primary identity document.
"Labor and the Greens need to consult with Tasmanians on their proposed amendments to remove gender from birth certificates. No other State or Territory in Australia has taken the step proposed of removing gender from birth certificates," she said in a statement.
"For Tasmania to do so, in the absence of any proper consideration of the reform, exposes the state to a range of potentially serious unintended consequences.
"Tasmanians have not had the chance to have their say on a matter concerning their primary identity document."