The Latrobe Aquifer Financial Assistance Package includes $3.6 million from the Australian Government's Water for the Future plan and $1.4 million from the Victorian Government.
Australian Government Parliamentary Secretary for Water Dr Mike Kelly and Victorian Parliamentary Secretary for Water Michael Crutchfield said the payments were the result of several years' work between the Victorian and Australian Governments, with participation from local farmers.
'Groundwater levels in the Latrobe Aquifer have been falling by about one metre annually for the last 30 years,' Dr Kelly said.
'This means that irrigators have had to drill new bores and lower their pumps, increasing their costs.
'The assistance package recognises these increasing costs and will help to offset future costs. The money will help with replacing bores, replacing or lowering pumps and increased pumping expenses.'
Mr Crutchfield said the package was available to licensed irrigators in the Yarram Water Supply Protection Area and the Stratford Groundwater Management Area who had been adversely affected by falling groundwater levels.
More than 30 farmers will receive the payments, to be administered by Rural Finance.
'This is a good outcome for local farmers,' Mr Crutchfield said.
'It will help them continue operating in the area, supporting local businesses and communities.'
Farmers in the areas will continue to operate within existing caps on groundwater use.
The Victorian Government has groundwater management planning processes in place to minimise the impacts of ongoing declining water levels in the aquifer.