Former PM Scott Morrison said the app was "as essential as putting on sunscreen"
Health Minister Mark Butler urged people to delete the app, calling it a "colossal waste" of taxpayer's money.
COVIDsafe was previously touted "as essential as putting on sunscreen" by former Prime Minister Scott Morrison.
But experts had questioned the efficacy of the Bluetooth-based tracking method.
The app, which was first launched in April 2020 and cost $14m (£11.42m), was designed to help manual contract tracers identify positive Covid infections.
Mr Butler, who has previously called for the app to be scrapped, revealed that just 17 close contacts not found manually had been identified since then.
"It is clear this app failed as a public health measure and that's why we've acted to delete it," he said.
COVIDsafe was designed under the country's previous government which refused help from tech giants Apple and Google, whose contact-tracing system was adopted by more than 50 jurisdictions globally.
It was considered a critical part of the government's strategy to return to normality. However, it was beset with technical difficulties from the start.
Bluetooth technology required an iPhone to be unlocked for the app to work properly and users also had to actively consent to their data being added and used.
The app will formally be decommissioned on 16 August. Mr Butler confirmed no users' data would be retained.
Mr Morrison previously called the app a ticket to a Covid-safe Australia, saying: "It gives us protection as a nation."
-- Courtesy of BBC News