The 65-year-old will be forced to pay Alex Greenwich $100,000 after a tweet directed at him was found to be unlawful sexual harassment.
The sexually explicit tweet from the NSW upper house independent in 2023 has previously been ruled to be defamatory by the Federal Court.
Mr Latham's tweet came in response to a post quoting Mr Greenwich describing him as a "disgusting human being".
The online sparring match between the two politicians followed violent protests outside a church in Sydney's southwest, where Mr Latham was giving a pre-election speech in March 2023.
About 250 mostly male counter-protesters violently attacked police and 15 LGBTQI protesters.
The NSW Civil and Administrative Tribunal imposed the maximum penalty due to the extreme abuse Mr Greenwich received and the intense impacts he felt.
It found Mr Greenwich had suffered extreme psychological damage as a result of Mr Latham's actions.
The tribunal did not order Mr Latham to produce an apology, saying it would be pointless given it would likely not be genuine.
Mr Greenwich welcomed the decision and said the result was a landmark ruling for LGBTQIA+ rights in the state.
"This decision sends a clear message: public figures are not above the law, and online platforms are not a space for unlawful vilification.," the member for Sydney said in a statement.
"The tribunal has made clear that the law does not require anyone to endure unlawful vilification or sexual harassment."
Mr Latham was ordered to remove any material from his social media that vilifies Mr Greenwich on the basis of his homosexuality and to refrain from making any more unlawfully vilifying statements.
He is also ordered to pay Mr Greenwich's legal costs.
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