A dual-board set up is one of the major reform items, with the plan to have one for making interest rate decisions and second for overseeing the institution's operations.
A power allowing the treasurer to intervene in interest rate decisions is also set to be abolished.
The veto power, outlined in the RBA Act, has never been used.
Dr Chalmers said the reforms were the biggest undertaken at the major economic institution in more than three decades.
"This legislation will strengthen the Reserve Bank's independence, clarify its mandate and modernise its structures," he said in parliament on Wednesday.
He said the new monetary board would be guided by a new Statement on the Conduct of Monetary Policy as a supplement to the Reserve Bank Act.
"It will set out the views of the government and the Reserve Bank on important aspects of monetary policy, including the flexible inflation target of two to three per cent," he said.
"This will help improve co-ordination between fiscal monetary and macroprudential policies."
An independent review of the RBA was released in April and called for a range of renovation measures, some of which the institution has already acted on, such as the move to fewer meetings a year.
12°C