Devonport Mayor Annette Rockliff said the council had partnered with MyState to open the fund as a safe place for people to donate.
The money from the GoFundMe page for the families, which has raised more than $1 million, organised by Zoe Smith will be transferred into the fund.
"This fund will help the families directly affected, as well as the whole Hillcrest community," Cr Rockliff said.
"It will support those families and go directly to those families and that community."
Cr Rockliff, Ms Smith, Hillcrest Primary School principal Jerome Pape, MyState people and community affairs general manager Jannette Whittle and state recovery advisor Craig Limkin will sit on the board and oversee the distribution of the fund.
"We urge our community that if they want a practical way to support those families, this will be a legitimate and trustworthy place they can go to," Cr Rockliff said.
Ms Smith's vision for the GoFundMe page was to raise $1000 and donate it to the families but the generosity of the community has surpassed her expectations.
"I have been overwhelmed by how much people have donated," she said.
"It has been beyond anything we could have comprehended.
"I am so proud of our community for donating and how generous they have been.
"I think it proves how shaken up everyone is, how tight knit of a community we are and how much it truly has affected people because everyone just wants to help.
"The plan moving forward is to move this money to the fund and through the committee of myself, the mayor and other members, to distribute that fairly and to make sure that reaches all the families and the people surrounding that community."
Premier Peter Gutwein said the state government had convened the the regional social recovery committee and would provide first-stage funding of up to $500,000 to support the community.
He said a committee made up of representatives from government agencies, as well as the Devonport City Council, would identify needs for both short and long term recovery.
"This will include items such as counselling and social worker support, assistance to first responders and immediate support to families who have been impacted," he said.
You can make a donation to the public fund via online banking:
Or by visiting your local MyState branch.
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