Customers will pay more for home-branded milk at Coles and Woolworths stores, with the levy to be passed on to dairy farmers gripped by drought.
The supermarket giants have announced milk sold under their names will cost an extra 10 cents a litre from Thursday.
It comes amid a series of campaigns raising funds for farmers struggling against bone-dry conditions, and follows a Queensland Dairyfarmers' Organisation petition calling on Australians to shell out.
Coles will increase the price of its 3-litre branded milk from $3 to $3.30 until the end of the year.
Woolworths will do the same until mid-October, when it introduces a temporary range of milk at $1.10 per litre in Queensland, NSW, ACT and Victoria, with funds going to farmers in those states.
The retailer says money raised will go to its supplier, Parmalat, which will then distribute it on a monthly basis among the farmers with whom it works.
Prime Minister Scott Morrison was slow to push the levy as a problem-solver when the department of agriculture began investigating how it could be implemented.
Just weeks ago Mr Morrison said the sustainability of the dairy industry should not come at the cost of households.
"I don't want to see people paying any more for milk and I don't want to see dairy farmers getting ripped off," he said at the time.
Federal Agriculture Minister David Littleproud on Thursday said he'd been assured all of the money would get to the farm gate.
"I'm going to hold them to account, don't worry," Mr Littleproud told ABC radio.
However, he did not offer specific detail about how the government might ensure transparency around the levy's distribution.
"There's still more to be done, I'm not running away from it, but it's a good first step," he added.
Queensland Dairyfarmers Organisation president Brian Tessman told 3AW radio he wants the levy applied to all milk, along with an overhaul of the domestic milk market.
"This won't help much, this is just a flash in the pan," Mr Tessman said.
"We need to give farmers more bargaining power and help them get a fair return out of the market so they aren't going cap-in-hand to processors and retailers."
National dairy advocacy group Australian Dairy Farmers wants the levy to extend to all farmers affected by drought, not just those that supply to Coles and Woolworths.
It also wants a seat at the table.
"We urge Woolworths to include ADF on their Drought Relief Oversight Committee to ensure the national voice is heard," ADF President Terry Richardson said.
Australian Associated Press
