During a late night sitting on Thursday to mark the end of parliament for the year, the upper house agreed to an amendment that only police or the Director of Public Prosecutions (DPP), not private citizens, would have the power to commence hate crime prosecutions.
Seeking permission from the DPP was cited by the government as a key reason no person had been convicted under the law since its introduction in 2018.
All eight charges laid up to June - two on race grounds, two on religion and four on gender identity - have been withdrawn.
No charges have been laid for hate crimes based on a person's sexual orientation or HIV/AIDS status.
Mark Speakman warned the change would allow citizens to bring private prosecutions. (Dan Himbrechts/AAP PHOTOS)
The lack of successful prosecution came to light amid heightened tensions concerning the Israel-Hamas war that reignited eight weeks ago.
But the coalition, while supportive of opening the door to police-led prosecutions, warned the change could also allow citizens to bring private prosecutions.
"The government's poorly drafted legislation risks weaponising the provision in the hands of people trying to shut down free speech," opposition leader Mark Speakman and shadow attorney-general Alister Henskens said on Thursday.
"Even if people are ultimately acquitted there is the chilling effect of being threatened with having to go through a criminal prosecution."
The Greens also raised concern that no public review had examined the reason so few prosecutions had occurred and what extent, if any, the approval process played in that.
Parliament's upper house ultimately agreed to amendments proposed by independent MP Rod Roberts, to specify prosecutions for hate crimes can only be commenced by NSW Police or the DPP.
Attorney-General Michael Daley had previously attempted to hose down the coalition's concerns.
To his knowledge, no private prosecution had been run in the past two years.
Even if one was launched, the DPP had the power to take over baseless or any other prosecutions and discontinue them.
"There is nothing to suggest that unfounded private prosecutions are a problem for the NSW criminal justice system, despite the right of private individuals to commence proceedings applying for the vast majority of offences in the Crimes Act," he told parliament.
The effect of the change will be reviewed every 12 months.
