The ACT is set to become the first Australian jurisdiction to decriminalise small amounts of commonly used illicit drugs, such as ice, heroin, cocaine and speed.
Under a proposed law that the government has now endorsed, police would continue to target dealers and try to disrupt Canberra's drug trade.
However, people found with amounts considered to be "personal possession" — smaller than trafficable quantities — would be subject to fines rather than criminal charges.
The decision follows the recommendations of a Legislative Assembly inquiry into the proposal, which was tabled by Labor backbencher Michael Pettersson last year.
The government indicated on Thursday it would support the bill but make several amendments to it, such as clarifying the size of "personal" doses.
The legislation will cover most common illicit substances, including LSD (acid), MDMA (ecstacy) and psyilocybin (magic mushrooms).
The ACT was also the first — and remains the only — state or territory to legalise the personal use of cannabis, another of Mr Pettersson's bills.
Drug use a 'health issue', not a criminal matter
Health Minister Rachel Stephen-Smith said the ACT was leading the country by demonstrating that decriminalisation was a better way to protect the community's well-being.
She said the government continued to view illicit drugs as harmful and would work to stamp out their supply.
However, it recognised that "the harm associated with drug use is a health issue" and that treating drug use as a criminal matter did not help addicts.
"We know from research and evidence around the world that criminalising drug users does not reduce drug use, and that treating drug addiction as a health issue improves outcomes for everyone in the community.
"This legislation is part of our broader suite of policies developed in partnership with experts, people with lived experience and our alcohol and other drug sector to support those most in need to get the help and services they need when they need them."
Ms Stephen-Smith added that the new approach would take pressure off the justice system.
Only about 10 people a year were prosecuted for possessing small drug quantities in Canberra, she said.
"That's not a huge number, but all of that takes work — it takes preparation for the cases, it takes [legal] defence resources," she said.
A survey last year found Canberrans "overwhelmingly" supported further efforts to decriminalise drugs. Only one in 10 people supported imprisonment for possession offences.
Liberals say proposed law will endanger police
The Legislative Assembly, controlled by the Labor-Green coalition, is certain to pass the bill as both governing parties have now indicated support for it.
However, the Canberra Liberals have raised concerns.
Peter Cain MLA, a member of the inquiry that examined the proposal last year, said the bill was in conflict with the Commonwealth Criminal Code, and this posed problems that remained unresolved.
On Thursday, shadow attorney-general Jeremy Hanson said both the federal and New South Wales police commissioners had warned that the change would be dangerous.
Mr Hanson also said the Australian Federal Police Association had told the Assembly inquiry that relaxing ACT laws would increase drug use.
He argued that the small number of ACT prosecutions for possession showed that "this radical proposal" was unnecessary.
"This is not going to solve any problems — all it's going to do is create new problems," he said.
Will Tregoning, chief executive of Unharm, which advocates for safe, legal drug use, said decriminalising — issuing fines instead of pressing charges — could still have unintended consequences on already marginalised parts of the community.
