Rules forcing people to isolate for five days if they test positive to COVID-19 will end from October 14 for everyone, with support for some workers to be able to continue isolation if needed.
States will determine how to implement the change, but national cabinet agreed to continue targeted financial support for casual workers in aged care, disability care, Aboriginal health care and hospital care.
Support payments for people infected with COVID-19 who are not in those sectors will also end from October 14, with payments that continue to be funded equally by the Commonwealth and individual states or territories.
Scrapping mandatory isolation marks the end of one of the last remaining pandemic restrictions.
Chief Medical Officer Paul Kelly said he was asked to provide advice on whether isolation periods should be scrapped, and said he recognised there were low rates of COVID-19 transmission and high vaccination rates.
"It does not in any way suggest that the pandemic is finished," he said.
"We will almost certainly see future peaks of the virus into the future, as we have seen earlier in this year.
"However, at the moment, we have very low rates of … cases, hospitalisations, intensive care admissions, aged-care outbreaks and various other measures that we have been following very closely."
Professor Kelly's advice to national cabinet noted that "continued capacity to surge the response if required" remained a necessary consideration.
Prime Minister Anthony Albanese said where isolation was previously mandated there was a responsibility for government to provide support.
He said it was not sustainable for government to pay people's wages "forever".
"It was always envisaged that these measures were emergency measures that were put in place," Mr Albanese said.
"Isolation cannot be seen in isolation."
Mr Albanese said Australia was moving away from "COVID exceptionalism" and said, with other diseases such as the flu, the government did not step in to pay people's wages.
"We understand the pressures that are there, that is one of the reasons my government has focused as well on the incidences of casual work," he said.
Professor Kelly said while the pandemic continued "the emergency response is probably finished".
"We're not stopping infectious people going into the community now, and we won't be in the future," Professor Kelly said.
Mr Albanese said that had the unanimous agreement of state and territory leaders.
However, the Australian Medical Association (AMA) said now was not the time to be ending mandatory isolation requirements for COVID-19 cases.
AMA president Steve Robson said people calling for isolation to be removed did not understand the impact it could have on the community.
"I think people who are pushing for the isolation periods to be cut are not scientifically literate and are putting the public at risk and they need to understand that," Professor Robson said.
"We're seeing overseas a huge upswing in the number of COVID cases again. We're coming into holiday season where people will be travelling around the world. We think it is a period of significant risk and we're urging caution."
In the lead-up to Friday's meeting, several premiers had publicly called for the isolation period to be removed.
Others had noted they wanted to hear from the chief medical officer on the latest health advice before making a decision.
Friday's decision comes a month after the isolation period was reduced from seven to five days.
Editor's note (30/9/22): An early version of this story said that support payments would be kept for casual workers and workers in certain vulnerable settings. Payments will only be kept for casual workers in those vulnerable settings.
