Passenger vehicles will be ferried free across the Bass Strait for new bookings from March 1 to June 30, 2021.
Deputy Prime Minister Michael McCormack said an extra $6 million in subsidies would help boost passenger vehicle bookings on TT-Line and Bass Island Line ferries, and give some relief to the state's tourism industry.
"COVID-19 has significantly affected tourism in Tasmania and the number of passenger vehicles travelling across Bass Strait, which is why we are moving to increase the rebate already available under our Bass Strait Passenger Vehicle Equalisation Scheme to the value of $6 million."
The extra subsidy will apply to all new travel bookings from March 1 to June 30. When travellers book their tickets, the rebate will automatically apply.
The average saving for a standard vehicle will be $240 return. Ticket prices for motorbikes and pushbikes will also be zero. Those travelling with a caravan or motor home will also receive the average $240 return saving for their vehicle.
The subsidy will include passengers transporting an eligible passenger vehicle between King Island or the Furneaux Group and the mainland.
"The coronavirus pandemic hit the tourism industry in an unprecedented way, with Spirit of Tasmania bookings dropping by up to 85 per cent.
"This new boost will bring more travellers to our island, providing the kick-start to 2021 that we need to rebuild tourism.
"It represents an average saving of around $240 return for travellers. That's money they can now spend at small businesses, with tourism operators and in the many communities that are eager to welcome travellers back with open arms.
"This is a critical and targeted boost for tourism, as visitors who travel to Tasmania by sea are among the most valuable to the industry, they spend more, stay longer and travel further into our regional areas.
"In fact, these travellers account for 12 per cent of all visitors to Tasmania yet they contribute a massive 20 per cent of all annual visitor spending.
Braddon MP Gavin Pearce said the move aimed to support the many businesses providing the crucial transport link.
"Following a tough year, this subsidy will give a boost to the number of passengers coming to Tasmania during the traditional tourism shoulder-season.
"In 2019-20, the Australian Government provided assistance for 161,474 eligible passenger vehicles under the scheme."
It is expected the temporary, targeted investment will go towards an estimated 25,000 Spirit of Tasmania return fares. It will apply to all new bookings for travel from March 1, and will run until the $6 million is spent or to June 30 - whichever comes first.