The Senate has blocked a government move to restore the same-sex marriage plebiscite to its agenda following an emotional debate.
Labor, the Greens and the Nick Xenophon Team on Wednesday had the numbers to tie a vote at 31-all, meaning the move was defeated.
Liberal backbencher Dean Smith, whose attempt to initiate a parliamentary vote on gay marriage was stymied by his party colleagues this week, supported the government but chose to sit with the crossbench.
Emotions ran high during the debate with Labor senate leader Penny Wong urging the government not to expose her children with her female partner to hate.
"We love our children and I object, as does every person who cares about children... to being told our children are a stolen generation," Senator Wong told parliament in an impassioned speech, referring to comments made by the Australian Christian Lobby.
"It's exposing our children to that kind of hatred."
The government was trying to restore the defeated legislation rather than putting it back to the lower house because it wasn't confident its own members would support it, Senator Wong said.
The government will now proceed with a $122 million postal vote which does not require legislation.
A postal vote would see ballot papers in mailboxes from September 12 and a result declared on November 15.
There would be no publicly funded "yes" and "no" campaigns.
Senator Wong described the option as an expensive and damaging stunt.
The money could pay for three million GP visits, or thousands of teachers.
Instead it would be spent on a useless opinion survey given that conservative Liberal senators, such as Eric Abetz, have indicated they will not change their vote regardless of the outcome, she said.
"They simply cannot countenance people like me and others being equal," she said.
Acting Special Minister of State Mathias Cormann argued a public vote would be a "unifying moment for the country", enabling those on the losing side of the argument to more readily accept the result.
He rejected claims the debate around a plebiscite would be damaging, insisting the government trusted the Australian people to have a respectful debate.
© AAP 2017 Image Credit: AAP Image/Mick Tsikas