With the amendments, Serco will offer an improved service regime under an enhanced maintenance and remediation scope of work and schedule.
The company will provide maintenance and remediation work on an agreed cost recovery basis, subject to strict expenditure caps and an audit processes.
Serco CEO Rupert Soames said: "Today’s amendments represent an equitable solution for both parties.
"We remain absolutely focussed on delivering the highest standard of operational performance on this challenging contract and continuing to support the Australian Defence Force, as we have for nearly twenty years."
As per the new changes made to the agreement, the contract will conclude in June 2017, rather than running through to 2022.
In addition, under the terms of the settlement and amendment deed, both Serco and the Australia Government have agreed to a mutual release of claims they may have had against each other prior to the point of contract amendment.
According to the earlier deal, the contract was subject to an onerous contract provision (OCP), charged at the end of 2014, of £136m, together with a further charge of £66m relating principally to the impairment of receivables.
The company has used £16m of the ACPB provision in the first half of this year.