Employees who have tested positive for the virus and need to isolate from their jobs can receive the $750 payment, which will be available from Wednesday.
It comes after the federal government agreed to extend the isolation payments to the end of September. The scheme had expired on June 30.
Treasurer Jim Chalmers said the payments were reinstated following health advice on growing numbers of COVID-19 cases caused by a more infectious strain of the Omicron sub-variant.
He said the federal government would work collaboratively alongside the state and territory governments in helping to manage the third wave of Omicron cases.
The return of the isolation payments will come with a $780 million price tag, but the cost will be split among the federal, state and territory governments.
The government initially said it did not want to reintroduce the payments due to pressure on the federal budget.
Prime Minister Anthony Albanese has not indicated whether the September 30 deadline for the payments would be able to be extended.
On Monday, NSW Premier Dominic Perrottet said it was also time to review the seven-day isolation period for workers with COVID-19.
"I raised that last week about having a look at reducing that period of time because COVID's not going away," he told Sydney radio 2GB.
"We need to look at isolation requirements in a way that still maintains downward pressure on our health system," he said.
"As we move through the next phase of the pandemic we need to balance up the competing health issues - mental health issues, educational outcomes for our children, allowing people the opportunity to go to work," he said.
Case numbers are continuing to increase as a result of the BA.4 and BA.5 strains of Omicron.
Over the weekend, more than 78,000 new cases of COVID-19 were registered, with 107 deaths recorded.
More than 337,000 active cases were reported, while 4700 people were in hospital with the virus.
Experts have said the peak of the fresh wave of Omicron isn't expected to hit until at least the end of July.
With more hospitalisations set to occur in coming weeks, the Victorian government has put forward a more than $160 million package to respond to the wave.
The money will be used to fund 400 additional specialist staff across 12 major hospitals in Melbourne and Geelong.
It comes as hospitals have been experiencing a rise in cases accompanied by staff shortages due to healthcare workers being sick with the virus, with more than 10,000 staff off sick in the first week of July alone.
There's been a 99 per cent rise in hospitalisations with COVID in the state since June 22.