The Turnbull government has moved to rebuild relations with the artistic community by redesigning a controversial fund created by Attorney-General George Brandis.
Communications and Arts Minister Mitch Fifield, who replaced Senator Brandis as arts minister in Prime Minister Malcolm Turnbull's frontbench reshuffle, will also return $32 million that was stripped from the independent Australia Council. 
The arts community was stunned when the Abbott government announced earlier this year it would redirect $104 million from the Australia Council to a new fund administered by the arts ministry.
The Australia Council, which uses an arm's length, peer-reviewed grants model, is the government's principal arts funding body.
Labor slammed the National Program for Excellence in the Arts (NPEA) as Senator Brandis' "slush fund". Arts organisations complained funding decisions could be subject to political interference and said wealthy organisations would likely benefit at the expense of smaller, emerging organisations.
Musician Nick Cave and more than 300 writers wrote an open letter calling for Senator Brandis to be sacked for his "non-evidence based changes to arts funding".
The NPEA has been renamed and will now be known as Catalyst - Australian Arts and Culture Fund. It will have $12 million to allocate to arts organisations annually, down from $20 million because of the money that has been returned to the Australia Council. Senator Fifield will release new guidelines for the Catalyst fund on Friday.
He said he had consulted widely with the arts sector on the design of the fund and had listened to the sector's concerns.
"Catalyst aims to support innovative ideas from arts and cultural organisations that may find it difficult to access funding for such projects from other sources and could include library, archive, museum, arts education and infrastructure projects," Senator Fifield said.
"The program aims to forge new creative partnerships and stimulate novel ways to build participation by Australians in our cultural life."
In a bid to ease concerns in the sector, Senator Fifield stressed the fund will recognise "the essential role of small to medium arts organisations" as well as large organisations. "The new Catalyst fund is open to small, medium and large arts organisations at a national, regional and community level," he said.
"It will support projects that demonstrate innovation, increase access and participation in the regions and enhance our international reputation."
There will be three funding streams: partnerships and collaborations, international and cultural diplomacy, and innovation and participation.
The $32 million over four years that has been returned to the Australia Council recognises its important role in supporting individual artists, Senator Fifield said.