Equality Australia says the LGBTIQ+ community has been "overlooked" after Prime Minister Anthony Albanese confirmed last week that he would not seek to revive the religious discrimination bill.
The bill aims to prohibit discrimination in public places such as workplaces, schools, clubs and healthcare settings based on religious belief or activity, including if a person does not hold any religious belief.
In 2017, when Australians overwhelmingly , religious leaders, politicians, and activists voiced concerns that the new law conflicted with their religious beliefs. They feared that as public institutions adapted to the new reality, their freedom to practice and express their religion would be threatened.
The bill failed to gain enough support in the previous parliament sitting. Albanese blamed the Opposition for failing to submit amendments, while the Opposition argued that faith groups had not reviewed the draft.
He said the government had provided draft legislation to the Opposition "months ago," but he wouldn't proceed without their agreement for fear of stoking tension in Australia.
"One of the things I've spoken about is the need for greater social cohesion. And the last thing that Australia needs is any divisive debate relating to religion and people's faith," the prime minister told reporters on Friday.
"I respect people's faith, and I think that they should be able to engage free of discrimination … The timing, I said, had to be that we would introduce legislation during the budget session if agreement could be reached.
"The agreement hasn't been reached because there have been no suggestions from the Coalition for amendments to the legislation. So I don't intend to engage in a partisan debate when it comes to religious discrimination, and I think that that is unfortunate."
Equality Australia, which works to protect the rights of LGBTIQ+ people, said the government has broken an election promise and put teaching staff and students at risk of harm.
"Our community's needs have again been overlooked and blatant injustices ignored," Equality Australia chief executive Anna Brown said.
"This news is devastating to every Australian waiting for better protections, including gay and trans teachers, pregnant women, people who are divorced or in de facto relationships, as well as people of faith.
"More children are going to miss out on leadership roles or be refused enrolment, teachers will continue to lose their jobs or be denied promotions while many more live with the constant fear that someone will finally discover who they are".
Church lobby groups had campaigned for the bill to safeguard "religious freedoms," which they argue are necessary to ensure Australians can live freely in a time when freedoms are increasingly under threat.
In a review, the Australian Law Reform Commission recommended scrapping laws that allow religious schools to discriminate against staff on the basis of their faith.
Equality Australia research published earlier this year found almost one in 10 of Australia's largest faith-based service providers publicly discriminate against LGBTIQ+ people, while almost four in 10 are silent about their positions on inclusion.
Opposition legal affairs spokeswoman Michaelia Cash said holding negotiations on the bill "has been one of the most bizarre processes I have seen in my time in parliament".
"The prime minister kept this legislation secret from his own caucus. I was prohibited from sharing it, and many faith groups haven't seen it," she said.
Cash said it is "disappointing that the prime minister has let Australians of faith down" and said the bill as it stood would have had a "shocking potential impact on faith-based schools".
Responding to Albanese's comments, Melbourne Archbishop Peter Comensoli said it was "regrettable that such important legislation is not proceeding".
"However, I trust that the prime minister will be true to his word that protections for people of faith will not go backwards under his leadership."
