Employers will be handed up to $10,000 if they hire unemployed older workers in a bid to keep more over 50s in the workforce.
Employers will receive staggered payments for hiring workers over 50 who have been unemployed for six months or more.
Under the government's Restart program, announced as part of Tuesday's budget, employers will receive an initial payment of $3,000, plus further regular payments if they continue to employ the worker for two years.
The program is expected to cost about $525 million over four years and could benefit up to 32,000 older workers a year.
Treasurer Joe Hockey said the government wanted to keep older Australians in the workforce but acknowledged it was hard for many to find a job.
"There needs to be a change in the culture of many businesses towards older workers," he said in his budget speech.
"Employers can use these funds to assist employers to reskill and play a more active role in the workforce."
The government also says keeping people over 50 employed will help boost national productivity and reduce pressure on the budget.
It also fits with the government's plans to lift the pension age to 70 by 2035.
"We can't afford to have older Australians excluded from the workforce when they have a desire to work and have a positive contribution to make," employment minister Senator Eric Abetz said in a statement.
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