The Lesbian Action Group is asking the Australian Human Rights Commission to allow it a five-year exemption from discrimination laws in order to hold events for lesbians born female only.
Without the exemption, the group would be at risk of contravening sexual discrimination laws.
The bid for an exemption was first turned down by the Human Rights Commission in 2023, and again in January 2025 after the group appealed to the Administrative Review Tribunal.
On Wednesday, the Federal Court set aside the tribunal's 2025 ruling after Justice Mark Moshinsky found an exemption might not be unlawful.
It means the matter will now be returned to the tribunal for reconsideration.
Justice Moshinsky found the tribunal had erred in its legal reasoning and taken too narrow approach in determining in what cases an exemption could be granted.
"While an exemption may be granted in circumstances that could be described as 'positive discrimination', the power to grant an exemption is not limited to such cases," he said in the judgement.
Lesbian Action Group spokeswoman Nicole Mowbray welcomed the judgment, saying her community had been "decimated" by a lack of lesbian-only spaces.
"There's nowhere for young lesbians to find their people. They're telling us that they're very isolated," Ms Mowbray said.
"We're happy to come together in a second space, as appropriate.
"We just want to be afforded the right to have lesbian-only space."
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