Finance Minister Katy Gallagher says the value of contracts only available to local companies will be increased for the first time in more than two decades.
For non-construction contracts, the Australian-only tender threshold will be lifted from $80,000 to $125,000 from November 17.
The construction contract threshold will remain at $7.5 million.
"This is a big change in the way government does business," Senator Gallagher said on Wednesday.
"It's about backing Australian capability and making sure taxpayer dollars support Australian jobs."
More than 83,000 contracts worth $99.58 billion were published on the government's tendering database in 2023/24, the finance department says.
To be invited to tender in the new threshold, a company must register as an Australian business and its principal place of business must be on Australian shores.
It must also have at least 50 per cent local ownership or be traded principally on the ASX and be based in Australia for tax purposes.
The central database allowing businesses to advertise their services for government contracts will also be updated, with suppliers able to control which information is shared to give them the best chance of winning government money.
From July, all businesses will be able to register for tenders and publicise the characteristics to help them win contracts, including whether they're First Nations-owned or a small-to-medium size enterprise.
Female-owned businesses will also be encouraged to take more of the limelight, with a new publicly searchable register for women-owned businesses tendering for government contracts.
From 2026/27, the government will begin reporting on how many contracts are given to female-led companies.
"This is about making sure more of the Commonwealth's purchasing power flows directly to Australian businesses, creating local jobs and supporting our economy," Senator Gallagher said.
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