Prime Minister Tony Abbott has dumped Defence Minister David Johnston from his front bench and replaced him with veteran MP Kevin Andrews.
Mr Abbott has also promoted NSW MP Sussan Ley to be the second woman in cabinet and handed Scott Morrison the Social Services portfolio.
Health Minister Peter Dutton has been moved to the Immigration portfolio, while Ms Ley has taken over the Health job.
Mr Abbott's first reshuffle as prime minister contains several surprises, especially the move of Mr Andrews to the Defence portfolio, a job many had thought would be handed to Mr Morrison.
Senator Johnston's exit has been widely expected and comes after a series of gaffes and missteps,
including the assertion that he wouldn't trust the Australian Submarine Corporation to build a canoe, after losing a
chief of staff and
then two more senior advisers.
Mr Abbott said Mr Morrison's new role would see him responsible for crafting "an holistic families package which will be such an important part of our political and economic agenda in the first half of next year".
Treasurer Joe Hockey hinted strongly in an interview with Fairfax Media that a package that includes greater support for families with kids in childcare and a revised paid parental leave scheme would form the centrepiece of his second budget.
Mr Andrews served as both Workplace Relations and Immigration minister in the Howard government and is a political veteran. He takes on a portfolio that has become something of a ministerial graveyard.
Victorian rising star Josh Frydenberg has been promoted to the role of Assistant Treasurer vacated by Arthur Sinodinos on Friday, while South Australian senator Simon Birmingham will take over the Assistant Education portfolio which has been vacated by Ms Ley.
Mr Abbott said the reshuffle "will put jobs and families at the heart of our political agenda for 2015. This is a ministry for jobs and families and it is a sign that this is a Government which wants the economy and the budget to be front and centre in the coming year.
"I have said all along that this Government's whole mission is to build a strong and prosperous economy for a safe and secure Australia and this new ministry which I announce today will help to make that absolutely true in the coming year."
Three new parliamentary secretaries have also been appointed in the reshuffle, with WA MP Christian Porter to serve under Mr Abbott; Victorian Kelly O'Dwyer will be parliamentary secretary to Treasurer Joe Hockey; and Karen Andrews has been appointed parliamentary secretary to the Industry Minister Ian Macfarlane.
