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The new rules will see street-based sex work legalised with the exception of a few specific circumstances.
The reform is designed to encourage sex workers to seek out support and report crimes made against them.
The change falls under the Sex Work Decriminalisation Act 2021.
Under the reforms, people and organisations are also prohibited from discriminating against or refusing someone service on the basis they are a sex worker.
The legislation makes it an offence for sex work to be carried out near schools, care services and places of worship between 6am and 7pm and on holidays.
Minister for Consumer Affairs Melissa Horne said today was a important milestone for the industry.
“It’s an important milestone for sex work decriminalisation in Victoria and another step in ensuring the industry is regulated safely and fairly,” she said.
The first phase of decriminalising sex work commenced today and will remove most offences and criminal penalties for individuals participating in consensual sex work.
The second phase is expected to commence in late 2023 and will include the remainder of the reforms, and repeal the sex work licensing system.