Survivors of five infamous Fairbridge Farm Schools, where children were subjected to sexual, physical and mental abuse, will now be able to seek payments from the National Redress Scheme.
The commonwealth has agreed with NSW, South Australia, Tasmania, Victoria and Western Australia to act together as the funder of last resort.
The decision applies to the schools at Molong, Drapers' Hall, Tresca, Northcote and Pinjarra.
Families and Social Services Minister Anne Ruston said survivors of Fairbridge had been forced to wait too long for the recognition they "absolutely deserve".
"That wait ends today," Senator Ruston said.
The schools were run by the Fairbridge Society between 1912 and 1970.
Many of an estimated 2500 child migrants sent to most Australian states by the society were sexually abused, as well as regularly beaten.
They appeared set to miss out on compensation and acknowledgement because the Fairbridge Society no longer existed.
WA Child Protection Minister Simone McGurk said applications from Fairbridge survivors would now be given priority.
"Today is a significant day for the Fairbridge survivors," she said.
"I thank them for their patience and urge them to apply for redress, if they are eligible and if they wish."
Senator Ruston said the agreement meant applications could now be progressed which named the Fairbridge institutions and where a government played a role in placing the child.
"I would encourage all survivors of these institutions who may have been holding off putting forward an application to do so and be considered for redress," she said."
Under current rules, funder of last resort provisions only apply where a government was also liable for the abuse.
But the minister said as part of the second-year review of the redress scheme, the governance board would consider whether those provisions should be amended.
So far the commonwealth, all state and territory governments and more than 450 non-government institutions covering more than 63,000 sites including churches, children's homes, schools, swimming centres and sports clubs, across Australia are participating in the scheme.
A further 23 defunct institutions are currently being considered under funder of last resort provisions.
The scheme has received 9908 applications and made 5139 payments worth about $432 million.
Australian Associated Press