The Australian Government has approved the F88 Austeyr rifle upgrade programme to improve its firing capabilities, defence materiel minister Jason Clare said.
"This $8m investment will produce a qualified rifle design ready for production," Clare added.
Under the upgrade programme, Thales Australia will produce a lighter and better balanced Austeyr rifle for use by Australian soldiers in Afghanistan.
The new rifle will be fitted with Nato standard Picatinny rails, which will allow additional fittings such as sensors, illuminators, sights and aiming devices, including thermal imaging optics.
The rifle will also be equipped with an integrated grenade launcher attachment and sight to make it more efficient for use on the battlefield.
The funding is a part of the $448.6m LAND 125 Phase 3C programme.