Under the means-tested SchoolKids Bonus policy, eligible families - those entitled to Family Tax Benefit A - will receive $410 for each child in primary school and $820 for each child in high school.
A typical family will receive about $700 more than they were entitled to under the tax refund scheme.
The direct cash payments are being introduced after more than 600,000 eligible families failed to claim $300 million in rebates.
Provided parliament approves the measure this week, the first payment will be made in mid-June. Thereafter, payments will be made biannually in January and July.
The government will also issue back payments for the past financial year in a one-off bonus.
Previously, eligible families were required to keep receipts of school expenses incurred in the education of their children and claimed a refund through their annual income tax return.
The government believes many families either didn't know about the refund or didn't bother to keep the necessary paperwork to claim it.
"Parents don't have to pay out of their own pocket and then wait months to get paid back," said Prime Minister Gillard.
There will be no need for parents to show whether the bonus is used for school expenses.
"The costs of getting the kids to school are there ... regularly for families," she said, adding that parents had to buy uniforms, books and pay for school excursions.
"This is about is putting money into the hands of families that need it most."
Canberra father John Tuckey, whose daughter Linh started primary school this year, said he welcomed not having to keep paperwork.
"It's a winning move," he told AAP after talking to Ms Gillard at a shopping centre in Canberra yesterday.
The payments are expected to cost the budget - which the government has vowed to return to surplus - an extra $2 billion over five years.
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