One university commenced misconduct proceedings against a student for allegedly breaching a confidentiality clause after the student reported sexual harassment to the university, the National Student Ombudsman found in a review of the clause's use.
Gag clauses are often triggered automatically upon the filing of a complaint.
"The university seems more concerned about the case being talked about than investigating the actual harassment being reported," an anonymous student was quoted as saying in the report.
"The university says it has zero tolerance of gender-based violence, but when you actually go through the process of reporting, it is not a zero-tolerance response.
"Everyone who reports says they ended up regretting it. They felt blamed and punished by the university."
Ombudsman Iain Anderson found 21 of 44 universities - or just under half - used confidentiality clauses, gagging up to 770,000 students if they made a complaint.
James Cook University, the University of Newcastle and the University of Technology Sydney were found to be improperly applying confidentiality requirements.
"For each university, the NSO found its application of confidentiality clauses impacted one or more of the principles of trauma-informed practice, putting student wellbeing and recovery at risk," the ombudsman said.
In its report released on Tuesday, the watchdog recommended loosening confidentiality agreements and ensuring they did not extend beyond the end of the complaints process.
A confidentiality clause should only apply to the complaints process and not a student's experience, it said.
It singled out UTS, saying it needed to stop applying gag clauses until it updated policies and procedures that clearly outlined when confidentiality requirements did or did not apply.
The university also needed to update its sexual harm prevention and response policy to clearly release students from confidentiality clauses after complaints.
James Cook University and the University of Newcastle were given three months to update their policies and procedures to release students after complaints and misconduct investigations had been finalised.
All universities that used gag clauses needed to ensure there were exceptions so students could access psychological and professional health support, legal advice and external recourse avenues, the ombudsman said.
A student should also be able to bring a support person or legal professional during a complaint or misconduct process and universities needed to meet record-keeping obligations, the report recommended.
Silencing students undermined recovery and a trauma-informed response needed to be kept in mind, the ombudsman said.
"Students should have the right to talk to others for support and seek external advice after they have made a complaint to their higher education provider," Mr Anderson said.
"Excessive confidentiality can cause a complainant to feel silenced or disempowered about the experience they had that led them to complain."
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