Beginning Sunday, about 300 of the country's largest polluters will pay $23 ($24 Cdn) for every tonne of carbon dioxide they emit. Emissions trading with regular auctioning of pollution permits will begin in 2015.
The tax is more than twice the cost of carbon pollution in the European Union, currently trading around 8.15 euros a tonne.
During the unveiling of the scheme last year, Prime Minister Julia Gillard predicted the tax would cut Australia's emissions by 160 million tonnes within a decade — or the equivalent of taking 45 million cars off the road.
Gillard told reporters on Sunday the tax is necessary to fight global warming but will not impact the standard of living of Australians.
"For Australians right around the country they'll be going about their ordinary Sunday, maybe some time with famliy and friends," she said in Melbourne.
"But as Australians go about their ordinary Sunday, our nation is seizing a new future. From today, our big businesses that generate carbon pollution will have to pay a price for generating that pollution," she said.
The tax is controversial. Business says it will pass the extra charges on to the consumer. The opposition says it will repeal the tax if elected.