A submission to the child abuse Royal Commission by the Truth Justice and Healing Council proposed the scheme be operated by the government, but funded by the institutions responsible for the abuse.
"The days of the Catholic Church investigating itself are over," Francis Sullivan, CEO of the Council, said.
He also expressed hope that the redress scheme would be a 'giant step forward' in providing justice for victims continuing to suffer from the 'devastating impacts of child sexual abuse, and added that a non-adversarial approach would be needed to ensure 'just, compassionate and fair' compensation was provided.
A spokeswoman for the Survivors Network of Those Abused by Priests approved of the proposed scheme, but said that ultimately "actions speak louder than words."
"Our experience has been that they make big promises but, when it comes down to it, what they deliver is nothing like the PR message," she told the Sydney Morning Herald.
"That has been the case over many decades in many countries."
Under the proposed redress, victims who have received compensation in the past would still be able to access the scheme.
Claimants would also be allowed unlimited time to bring forward a claim, and offered limited free legal advice.
Sullivan acknowledged that the job of the church in assisting victims needed to go beyond financial payouts.
"We have a lifelong responsibility and commitment to care for the people who have been abused in our institutions," Sullivan said.
"If this means providing, for example, ongoing counselling services, help finding work or accommodation or assistance with meeting day to day activities then that is what we will continue to offer."