The state government in Queensland has passed laws that change the status of Queensland Rail from a government-owned corporation.
The organisation will now be known as the Queensland Rail Transit Authority.
Transport Minister Scott Emerson said the changes will allow the government to restructure Queensland Rail and outsource its services.
The ABC reports the state government intends to allow other companies to tender for long-distance and city services, as well as maintenance.
But Mr Emerson said passenger rail services will not be outsourced if the public sector can run them efficiently.
"I want Queensland Rail to continue to improve - I want them to improve their services, I want them to improve their frequency, I want them to improve their reliability - that's our aim for the first part of that," he said.
"Then we'll compare them to the private sector - my hope is that Queensland Rail is performing so well they'll be outperforming the private sector."
He said changes to Queensland Rail will make it more efficient and cheaper to run.
Opposition transport spokeswoman Jackie Trad said the bill is a step towards privatisation.