Clubs and coaches have long agitated to lift the soft caps after a series of cuts during the COVID-19 affected 2020 season.
The league announced the changes, which will gradually take place between 2025 and 2027, late on Tuesday afternoon.
The AFL cap will increase by $400,000 to $7.675 million in 2025, then by an additional $250,000 in 2026 and 2027 respectively, to ultimately reach $8.175 million.
The AFLW cap will increase by $100,000 to $1.175 million next year with further increases of $100,000 in each of 2026 and 2027, to ultimately reach $1.375 million.
The AFL estimated in 2025, club expenditure in their football programs across AFL and AFLW would be in the range of $11-$11.5 million.
Clubs are already able to pay 20 per cent of their AFL senior coach's salary outside the soft cap, as of this year, and that will now also apply to their AFLW equivalents.
Clubs can also claim an additional $25,000 deduction from the cap for professional development in AFLW programs.
AFL and AFLW clubs who are required to travel from interstate to Victoria for the respective grand finals can claim an additional $50,000 deduction, while clubs' finals allowances have been lifted.
The league's healthcare model has been adjusted to expand expenditure capacity for key resources including doctors, psychologists, allied health professionals and an Indigenous player development manager.
"Following extensive consultation with clubs, and particularly coaches, other stakeholders and the AFL commission we are pleased to confirm the soft cap policy for three years, providing clubs with planning certainty over the remainder of the current collective bargaining agreement which goes through to the end of the 2027 seasons," chief executive Andrew Dillon said."We have continued to talk to coaches and football departments and are also pleased to be able to bring in an AFLW senior coach deduction to now align with the 20 per cent AFL coaches deduction announced last year.
"As part of a commitment to continue to prioritise player health and safety we have revised the soft cap healthcare model to ensure minimum standards in healthcare resourcing are set across the competition and ensure equitable access to healthcare providers across both AFL and AFLW programs."
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