The state government has agreed to redirect funding for infrastructure projects, offered to the Mildura Rural City Council.
The council now has more than $650,000 to spend on rate relief, for farmers in the Millewa and at Carwarp.
Councillors agreed unanimously to provide $420,000 in state government funding to be applied directly to drought-stricken farmers' rates in the region.
Mildura Mayor Councillor Simon Clemence said council had also unanimously endorsed a plan to reallocate the $250,000 from the Victorian drought relief package, the Local Government Service Support Program - initially designated for infrastructure projects.
The rate relief will be applied to 253 broadacre dryland farm rate assessments and is expected to be delivered before the end of the year.
Premier Daniel Andrews gave the green light to using the infrastructure funding, when responding to a question from Mildura Independent MP Ali Cupper.
Mr Andrews told parliament had no objection to the council using the further $250,000, earmarked for infrastructure projects, for rate relief.
"There is an element of that money that was earmarked for a range of community activities, worthy, valuable things," Mr Andrews said.
"However, since that time - and I pay credit to the federal government around this particular issue -there have been some further payments and decisions made by the Commonwealth government that may see that need met.
"That means that there may be surplus funding that can be redeployed, if you like, for whatever decision the council may make."
Cr Clemence said the decision to provide rate relief followed consultation with drought-affected farmers in the Millewa/Carwarp area, who indicated it was a priority for them.
"Speaking directly to our farmers in the Millewa/Carwarp area, two things became abundantly clear," Cr Clemence said.
"Firstly, they're doing it extremely hard at the moment due to the ongoing drought, and secondly, help in paying their rates would be of the most assistance."
He said while this would provide some relief to Millewa/Carwarp farmers, council was aware of broader reaching impacts of the drought.
"The longer this drought continues, the more widely we're going to see the impacts across our region," Cr Clemence said.
Millewa farmer Ian Arney said Ian Arney described the decision as a "terrific result.
"It's just a significant amount of money, I won't have to find," Mr Arney said.
Millewa farmer Ian Arney said the decision was a terrific result.
'It's just a great relief, it's a signficant amount of money, I won't have to find," Mr Arney said.
"It will certainly go a long way towards helping, it's greatly appreciated.
"The psychological benefit is huge."
Mr Arney said he had turned livestock, onto his crops, before they were put into containment areas.
"After trying to harvest the one crop that had some chance, I let the sheep onto it," he said.
He said farmers in the Millewa were now waiting for rain, but still had plenty of things to do, in planning for a crop next year.
His 4000 Merino breeding ewes were now in containment areas and being fed hay and barley.
"It's a lot cheaper than last year."
Mr Arney said there was an upside to the current dry conditions, with producers who had been able to hang onto breeding stock benefitting from sales generated by the next good rain event.