Australians who were harmed or lost a close family member in a Hamas attack on Israel could receive payments of up to $75,000 after it was declared a terror event.
Hamas killed 1200 people and took hundreds of others hostage in the October 7 attack, according to Israeli officials.
The federal government made a terror declaration on Friday evening, paving the way for Australians to receive payments previously offered after events including the September 11 attacks on America.
Labor has been accused of dragging its feet in facilitating the government funding.
The Executive Council of Australian Jewry has previously said the decision not to declare the event a terrorist act perplexing and difficult to comprehend.
Hamas is considered a terrorist group by the Australian government.
In the months since October 7, Israel has unleashed a bombing campaign, a blockade and a ground invasion that killed 27,000 Palestinians, left millions of people homeless and pushed many more to the brink of starvation, according to the UN and local health ministry.
Top diplomats in Australia and the US have held talks about the ongoing crisis in the Middle East, after the White House imposed sanctions on four Israeli settlers accused of violence in the West Bank.
Australia is being urged to follow suit, which one Middle East expert said would be in line with the government's policies towards illegal settlements.
"This is a breakthrough because it's one of the very few times the US officially recognises Israeli settler terrorism against Palestinians in the West Bank," Australian National University lecturer Anas Iqtait told AAP.
"Should Australia follow suit? Of course, this is about 40, 50 years too late."
Australia's Palestinian community has also called for immediate action.
"It's clear words are not enough to deter Israel from continuing to expand its illegal settlements," Australia Palestine Advocacy Network president Nasser Mashni said.
"Australia must back this with decisive action including sanctions."
Foreign Minister Penny Wong met with US Secretary of State Anthony Blinken to discuss Israel's war on Gaza.
Afterwards, Mr Blinken said Israel must do more to stop violence against civilians in the West Bank and hold accountable those responsible for it.
He also stressed the need to protect civilian lives in Gaza and called for Hamas to immediately release all Israeli hostages.
Senator Wong has repeatedly condemned settler violence and called for Israel to follow international law.
She made a commitment on humanitarian assistance for Gaza following their meeting.
The aid would be delivered despite Australia pausing funding to a United Nations agency that supported Palestinian refugees, Senator Wong said.
The UN agency is investigating allegations some of its staff were involved in the Hamas attack.
Israel wants the organisation disbanded but Senator Wong praised its work in the occupied Palestinian territories.
The humanitarian situation was dire with 400,000 Gazans starving and a million more people at risk of starvation, she said.
Australia's humanitarian coordinator has been instructed to work with other nations to ensure assistance flows to Gaza while allegations against the UN agency are investigated.
with Reuters
