Victoria will abolish the so-called Ellis defence, an "unfair legal loophole" which has prevented child sexual abuse survivors from suing organisations like the Catholic Church.
Under proposed laws introduced to parliament on Tuesday, unincorporated associations such as churches, would have to nominate an entity able to pay damages.
"This deals with what is something that I think has re-traumatised victims and survivors for too long, something that has made a terrible set of circumstances even harder," Premier Daniel Andrews told reporters.
For too long "there's been this veil, this fiction, that in the case of, say, the Catholic Church" there is nobody who can be sued, Mr Andrews said.
"We know, of course, that there are considerable, indeed enormous, resources that are available to the Catholic Church."
In 2007, the NSW Court of Appeal found the Catholic Church was not a legal entity which could be sued for abuse in a case brought by abuse survivor john Ellis.
The Royal Commission into Institutional Responses to Child Sexual Abuse and the 2013 Victorian report Betrayal of Trust recommended the precedent be addressed.
Under the government's proposed laws, if an organisation refuses to nominate a proper defendant with assets, a court can do it for them.
Attorney-General Martin Pakula says he will be "both shocked and amazed" if it is blocked in the upper house.
The head of the Catholic Church's Truth Justice and Healing Council, Francis Sullivan, has welcomed the legislation.
"This is a proper step forward as a pathway for people who want to seek damages for what's happened to them in abuse cases in institutions like the Catholic Church. This is a very positive thing," he told ABC radio.
Child sexual abuse advocate Chrissie Foster thanked the government for moving to eradicate "a cowardly thing that the church uses to further deny victims".
Ms Foster and her late husband Anthony Foster campaigned for victims of clergy abuse after their daughters were raped by a priest.
Australian Associated Press