A $16 million government scheme has been created for victims of loose-fill asbestos.

The funding is being split between the Federal and ACT governments, and will be used to compensate Canberrans with asbestos-related illnesses as a result of living in “Mr Fluffy” homes.

Previous schemes have compensated those who installed the insulation, and those who were exposed as a result of later working on the homes. 

The new scheme is for those who have become sick after living in a loose-fill asbestos home.

The fund was created following years of campaigning by 53-year-old James Wallner, who was diagnosed with malignant pleural mesothelioma last year after spending 18 years of his youth living in a Mr Fluffy home in Canberra. 

Health Minister Greg Hunt this week acknowledged the “tireless advocacy” of the Wallner family. 

“I have been deeply moved by the suffering of those who have developed mesothelioma and other asbestos-related illnesses, through the simple act of living in their home,” Mr Hunt said.

“The Commonwealth’s contribution of up to $8 million will help establish the scheme, providing support to Canberrans who have been impacted by debilitating and deadly asbestos-related illnesses.”

The ACT government says it will match the federal contribution and manage the scheme.

Federal Labor Senator Katy Gallagher was the ACT's chief minister when the full scale of the issue came to light in 2014.

She has described the scheme as the “missing part of the Mr Fluffy response”.

“[In 2014] the ACT government's focus was dealing with the housing crisis around it and making sure we could buy back those houses,” she said.

“At the time, and noting that there is this delay between exposure and disease onset, the advice from the health department … was that there wasn't any noticeable increase by population of mesothelioma caused by exposure to loose-fill asbestos, but that it was something we would have to keep an eye on because of the delayed onset.

“Mr Wallner really deserves enormous credit for convincing the Commonwealth in this instance, of more of a moral obligation to people who lived in Mr Fluffy homes or who were around Mr Fluffy.”

The ACT government launched a billion-dollar scheme in 2014 to buy back the homes tainted by Mr Fluffy asbestos.