Under draft amendments to the federal government's bill backed by the Coalition, gay students would not be able to be expelled from faith-based schools, but the same protections won't apply to transgender students.

Cristine said any bill that allowed discriminatory behaviour towards any child should not pass. She said if it was to pass, protections for all children must be included.

"It makes me scared for the world my children are going into," she said.

"Whether it be a trans child, or any child, someone has gone to the effort of leaving out protection for a whole group of children.

"We need to remember they are all kids and any establishment that can discriminate people based on their identity is incomprehensible."

Protections for LGBTQI+ students at risk of being expelled from religious schools was a key concern amongst moderate Liberals, with some having threatened to cross the floor over the issue.

Cristine's 10-year-old daughter, who will remain unnamed for privacy reasons, does not attend a faith-based primary school and said all her teachers were "beyond exceptional" with their support.

However, in the future Cristine intends on enrolling her daughter in a local private school, and said she would never want the possibility of her daughter being expelled based on her gender identity to be a reality.

"I had no idea that my trans child could have a hard time going there," she said. "It broke my heart."

"I've got no problems with school's saying they don't agree with things when it's done respectfully. My problem is that the bill will allow them to tell kids what they're doing is wrong."

Since transitioning, Cristine said she had seen a marked positive difference in her daughter's mental health and would not want bills to put this at detriment.

"If it wasn't for my child's Year 3 teacher, I don't think she would have found her voice so quick. I think we would have had a lot more years of struggling," she said.

"And for her to be brave enough to stand up and say 'this is me' is amazing.

"But to think there's some sort of legislation that could squish that, I cannot get my head around it."

Principal solicitor of the Shoalcoast Community Legal Centre, Justine O'Reilly, said the bill is drafted in a way that could allow "excessive" discrimination.

Its provisions would override every federal, state and territory anti-discrimination law to make "statements of belief" immune from legal consequences if they are based on a genuinely held religious view.

"It's giving schools an enormous power to discriminate against children that are of the LGBTQI+ population, or even children just questioning," said Ms O'Reilly.

"This Commonwealth bill can mean you can discriminate at any stage of the child being in a religious school, and that could be terribly damaging to children.

"It really does fly in the face of a first world country that supposedly upholds human rights."

Wellbeing services coordinator at Vincentia High School, Joanne Warren, feared the impact the bill could have on LBGTQI+ students mental health.

"All schools in this (South Coast) region would have students who would be transgender or at least questioning," she said. "Regardless of that, all students must be welcome however they choose to present.

"We know that young people who are questioning or confused about sexuality or gender can often be the victims of bullying and harassment.

"This has led to higher rates of mental health concerns, higher rates of self harm, a whole range of things that can happen because young people don't feel connected, welcome and supported."

Finance Minister Simon Birmingham confirmed the draft amendments to the bill would not provide protections on the basis of gender identity.

"The proposal that is put forward is to repeal the exemption as it relates to students being exempted from the Sex Discrimination Act on the basis of their sexual orientation. Now it doesn't go further than that," he told ABC Radio on Tuesday.

"It would still be subject to a relatively quick, within 12 months, review by the Australian Law Reform Commission, to try and address the best way to be able to enact any other changes without undermining certain issues around same-sex schools."

However, Prime Minister Scott Morrison denied transgender students would be able to be expelled from religious schools.

"This bill does not seek to endorse that arrangement. That's an existing law. What we're dealing with today are not those matters," he said.

"We're dealing with discrimination against people for their religious belief and faith."

We depend on subscription revenue to support our journalism. If you are able, please subscribe here. If you are already a subscriber, thank you for your support.