The state of Victoria's Supreme Court awarded the funds on Wednesday to more than 1,300 refugees held at a centre on Manus Island between November 2012 and December 2014, on the grounds of illegal detention and negligent treatment.
The remainder of the almost 2,000 detainees from that period have been granted an extra two and a half weeks to join the class action and register for payment if they wish to.
Justice Cameron Macauley declared the decision, which is believed to be the nation's largest human rights settlement, "fair and reasonable".
Australia offered the compensation agreement in June, more than three years after lawyers initiated the case brought against the government and two service providers operating on the island.
Officials have previously declared the deal "prudent", but denied wrongdoing.
Australian policy dictates that asylum seekers attempting to reach the country by boat are transferred to detention facilities in the Pacific Ocean on Manus, or the island of Nauru; which was not involved in the litigation.
Speaking to Al Jazeera, Nick McKim, immigration spokesperson for the Australian Greens party, said: "The government of Australia wants to appear politically tough on refugees and tough on people seeking asylum."
As a result, political leaders have a "political imperative" to treat the detainees inhumanely, he said, and "that's exactly what they've done."
The centre on Manus is due to close in October, following a PNG Supreme Court ruling last year that declared the holding of people on the island unconstitutional.
The 803 men currently detained will be moved elsewhere in PNG, or relocated to third countries, according to government officials.
Lawyers representing the refugees who generated the claim said they are seeking to secure the compensation payment before the centre shuts.
"These detainees came to Australia seeking refuge, compassion and protection, which were all denied to them by successive Commonwealth governments," said Rory Walsh of the law firm Slater and Gordon.
"Today, the group has finally been delivered justice through the Australian legal system and the Supreme Court of Victoria. The result ... will allow meaningful compensation to be paid to group members much more quickly than would otherwise have been the case."
Distribution of the funds will be overseen by the court, with another hearing scheduled for October to determine when payments will begin.
Source: News agencies