He will most likely be buried in the small cemetery in Greta, south-east Australia, where his mother and several siblings are also laid to rest.
The decision means that Kelly will finally get his dying wish: the day before he was hanged in 1880 for murdering three policemen, he wrote to the governor of Melbourne Gaol asking "permission for my friends to have my body that they might bury it in consecrated ground."
Instead, his headless remains were thrown into a mass grave, where they lay lost for many years before being identified in September using DNA tests .
His relatives are now considering holding a public memorial service as well as a private burial, according to great-grand nephew Anthony Griffiths, "because we recognise there are a lot of Australians that would like to be part of that final farewell."
In a measure of the strong feelings the infamous Kelly continues to provoke, other Australians reacted angrily to the prospect of a public memorial - which risks becoming a shrine for the gang leader's many fans.
Police Association secretary Greg Davies told the Herald Sun:
"I get sick and tired of people lionising someone who was a multiple murderer. He wasn't a Robin Hood; he didn't steal from the rich and give to the poor. He stole from everyone and kept the proceeds for himself."
This Friday, November 11 marks the 131st anniversary of Kelly's death, a day when those who hail him as a folk hero traditionally leave flowers outside the Melbourne jail where he died.