With Australians consuming over 2-billion litres of fresh milk annually, milk bottle packaging is a significant source of plastic packaging waste in Australia. Fresh milk consumed in Australia used ~48,000 t of high-density-polyethylene (HDPE) plastic in 2019–20 with a recycled content of only ~5 %. Owing to the low recycling rates it contributes significantly to overall HDPE packaging waste. To identify sustainable approaches to address this waste stream, this study developed a detailed model of the milk bottle supply and end-of-life management system for Australian used milk bottles in 2019–20 for the first time. Using milk consumption statistics, data from milk bottle label manufacturing, and HDPE packaging management data, a material flow analysis was performed to quantify flows of used milk bottles, and to evaluate possible system changes to improve recycling rates. Results indicated 39 % of milk bottles were recovered in 2019–20, with the majority of HDPE recovered utilised for non-packaging applications. A poor collection rate is the most significant factor limiting circularity of the waste stream, with only 41 % of all used milk bottles collected for recycling. Improving the collection of used milk bottles, through for example dedicated container collections, could result in recovery rates of approximately 60 % being achieved, with up to 50 % of recyclate generated utilised for new packaging applications. Findings from this study are relevant to other packaging material streams because the interventions considered could be broadly adopted for other plastic packaging streams to support a transition to a circular packaging economy.