The controversial cashless debit card is destined for the scrapyard, paving the way for thousands in remote communities to come off it next week.
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The card will become voluntary for people in Ceduna, Bundaberg, the East Kimberley and the Goldfields.
Welfare recipients will be able to transition off the card from October 4.
Those wishing to stay on the card will transition to a new government scheme from March 2023 after the card is scrapped.
The cashless debit card quarantines up to 80 per cent of a welfare recipient's income, which cannot be withdrawn in cash or spent on gambling or alcohol.
The compulsory aspect will remain in the Northern Territory, as well as Cape York and Doomadgee in Queensland for the time being, but users will also transition to the government's new scheme in March.
Social Services Minister Amanda Rishworth said in Cape York and the Doomadgee region referrals to the card were currently made through the Family Responsibilities Commission.
"How they arrive on income management is after a conference with elders," she said.
"Local Indigenous leaders have worked in the community and have set up this process as something that is self-determined."
The card will only be compulsory for people in the Northern Territory referred via certain pathways, including by a social worker, child protection authority or the banned drinkers register.
The government will continue consultations with communities not yet able to transition off the card as it reviews the future of compulsory income management in Australia.
"We need to transition people safely off income management, we're starting with the cashless debit card," Ms Rishworth said.
Independent senator David Pocock said while all mandatory income management needed to be abolished, the bill was an important first step.
The opposition voted against scrapping the card, arguing it would lead to an increase in drug use and violence in vulnerable communities.
Liberal senator Claire Chandler said the bill "shows little care for the consequences for the communities which rely on this card to tackle social harm".
"Particularly harm associated with drug and alcohol addiction."
The repeal bill cleared its final parliamentary hurdle after the Senate sat late into Tuesday night to pass the amended bill.
It was then ticked off in the lower house on Wednesday.
The Greens and independent senator Jacqui Lambie alongside Senator Pocock voted with the government to repeal the card.
Australian Associated Press
