TasWater has announced the project following the discovery of cadmium and lead in the water "in excess of acceptable levels".

TasWater's chief executive, Michael Brewster, said that the pipeline's construction was scheduled for later this year with water to be flowing by the end of 2016.

Once the pipeline has been constructed, it will supply the town with fully treated water for years to come.

Until now Avoca has mainly drawn its water from the South Esk River.

"Several alternatives were considered, including bore water, collecting rainwater at individual properties or carting water by road to replenish the town's reservoir," Mr Brewster said. "Our assessment indicated that building a pipeline which brings water from the new water treatment plant at Fingal is the most sustainable long-term option."

Mr Brewster said the new treatment plant also had more than enough capacity to meet the needs of both towns.

The pipeline will be constructed mainly along existing roadside easements, feeding fully treated water into the local Avoca Reservoir which will comply with the Australian drinking water guidelines.

The town's existing chlorination system will be retained to boost chlorination levels in the water arriving from Fingal.

The existing reservoir in Avoca will provide enough storage to meet peak demand while the pipeline itself will be designed in a way to minimises the risk of damage and interrupting the supply between Fingal and Avoca.

TasWater is proposing to spend more than $100 million each year for the next three years improving water and sewerage infrastructure across Tasmania and has committed to reducing the number of communities that need to boil their water or cannot consume their water from 27 to eight by 2018.