Tasmania became the first Australian state to make registering gender on birth certificates optional Wednesday, with transgender advocates welcoming the reform as a vital step towards a more inclusive future.

The new laws remove the need for people to have surgery in order to make the designation change on the document and allow people aged 16 or older to change their registered gender without needing parental permission.

Advocates welcomed the landmark decision they said would reduce discrimination in the transgender community.

"Young transgender and gender diverse Tasmanians will grow up in a different world from the one we have known because the law will respect and protect who they are," Roen Meijers from Transforming Tasmania said in a statement.

"I hope our achievement inspires the rest of the nation to move quickly towards the reforms that are so overdue in this country."

Advocates have argued that an official designation that does not match a person's gender identity can create complexities and confusion for a person and their family, as well as open up people to discrimination.

"Parents of transgender and gender diverse kids are just so happy that our kids will no longer face legal discrimination and will be able to live their lives true to themselves," Candace Harrington from Tasmanian Families for Trans Kids said in a statement.

The reforms have been met with much resistence from Tasmania's conservative-led parliament, but passed after an MP crossed the floor to vote with opposition parties.

Conservative Prime Minister Scott Morrison has previously slammed the plan as "ridiculous".