From January, redress scheme payments will not be included in means testing of applicants for aged care, and won't be considered a financial asset.
The redress scheme provides payment and support to those who experienced institutional child sexual abuse, with the program being a key recommendation of a 2017 royal commission.
Survivors would not be financially disadvantaged when accessing aged care in the future, Social Services Minister Amanda Rishworth said.
"The National Redress Scheme is in place to provide best possible outcomes for survivors of institutional child sexual abuse, including removing unintended adverse impacts of any payment they receive as part of redress," she said.
"Entering care and potentially be re-institutionalised can have devastating impacts on survivors of institutional child sexual abuse, by ensuring their redress isn't treated as an asset we are ensuring fairness in their later years."
Exemptions for the payments will be made through data matching, meaning survivors won't have to relive their trauma by disclosing the abuse again.
Means testing is used for aged care services to determine the financial support levels someone receives from the government.
The announcement of the changes on Tuesday coincides with National Survivors Day, which acknowledges the survivors of institutional and sexual abuse.
Aged Care Minister Anika Wells said the exemption for redress payments were part of reforms for the sector.
"All older people, including survivors of child sexual abuse, will have a right to access trauma-aware and healing-informed aged care services under our new aged care bill currently before parliament," she said.
1800 RESPECT (1800 737 732)
National Sexual Abuse and Redress Support Service 1800 211 028
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