Giggle for Girls app founder Sall Grover appealed a 2024 finding that they discriminated against Roxanne Tickle by blocking her from using the app, and refusing to reinstate her.
Ms Grover and Giggle argued the decision to exclude Ms Tickle was exempt from being classed as discrimination, because the app aimed to achieve "substantial equality" and create a safe space for women.
On Friday, the court upheld its decision that the exemption did not apply, meaning similar arguments made in defence of single-sex spaces would likely also fail.
The panel of three judges also ruled the discrimination levelled against Ms Tickle was not "indirect" as previously found but direct, doubling the damages awarded to her by the court to $20,000.
Under the law, direct discrimination would be treating someone worse than someone else based on their gender identity, as opposed to indirect discrimination which may result from a rule or condition being imposed.
The court found Giggle and Ms Grover treated Ms Tickle worse than they would a person designated female at birth.
Bond University discrimination and equality law expert Alice Taylor said the ruling essentially prevents organisations having rules denying entry to transgender people.
Dr Taylor said the ruling doesn't go as far to say that transgender women are women under law, but does say that a persons gender identity is "broadly and strongly" protected under the Sex Discrimination Act.
She noted exemptions such as for religious institutions or in a sporting context could still potentially be available under the act.
The decision does mean groups such as Giggle or other organisations can't rely on exceptions under the act on the basis they are creating equality for cisgendered women, for example, Dr Taylor explained.
"That can't exclude people who have diverse gender identities, if that gender identity is consistent with woman or man, and that's how they how they identify and how they are understood by the world," Dr Taylor said.
Ms Tickle was born male but identifies as female, having undergone gender-affirming surgery and hormone treatments and interacting among family, friends and at work as a woman.
Equality Australia legal director Heather Corkhill said for decades Australian law has recognised a person's legal sex is not limited to the sex they were assigned at birth.
"Any other interpretation would deny the reality and existence of trans people," Ms Corkhill said.
"The judgment reinforces that anti-discrimination laws are intended to protect everyone, particularly groups such as trans women who often experienced exclusion and disadvantage."
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