A 15 per cent pay rise for centre-based and out-of-school care workers, including cooks, support workers, trainees and apprentices as well as educators, was due to expire in November after commencing in late 2024.
The payment will extend to more of the sector after months of anxiety among parents and advocacy groups over whether they would be slammed with higher fees when it lapsed.
"Early educators deserve every cent they get and this funding locks their pay rise in," Education Minister Jason Clare said.
"The payment has worked to bring more people into the early education workforce and to keep costs down for families."
Early childhood teachers are $410 per week better off now than they were before the scheme began, according to the government, with 20,000 workers joining the sector since December 2024.
An additional 15,400 family day care workers and in-home carers will also be made eligible for the pay increases from July 1.
But the payment will come with more strings attached for employers, who need to apply to receive it before passing it onto workers through pay slips.
Payment will be cut or suspended for providers who do not meet the national childcare safety standard - currently five per cent of early learning services - from July 2027.
The move was a welcome response to dire warnings about imminent fee increases and instability without ongoing funding, advocacy group The Parenthood said.
"This funding is a genuine win," the group's chief executive Georgie Dent told AAP.
"Parents need affordable, accessible, high-quality early learning and care delivered by a stable and supported workforce. This is a positive and necessary step towards that goal."
The peak body lauded the expansion to family and in-home providers, and linking the payment to safety standard compliance.
Sector advocates had also sounded the alarm after the scheme was conspicuously absent from the federal budget, with the United Workers Union planning a strike in July if the government did not commit to additional funding.
Having promised to raise fees by no more than 4.2 per cent in the 12 months to August, providers will also agree and need to stick to a new limit for the coming year as part of the extension.
The payment can be terminated or required to be repaid by services that blow past the fee cap.
But providers urged the government to let childcare centres hike fees more after a 4.75 per cent increase to the minimum wage was announced in May, to kick in from July 1.
