The Cavaliers announced on Monday the hard-nosed Australian point guard had agreed to return to the team where he became a hero during last season's playoffs.

Dellavedova agreed on Monday to accept the one-year, $US1.2 million ($A1.7 million) deal the team offered him last month.

It's well below the reported $US4 million per year Dellavedova and his agent were asking for following his headline-making performances as the Cavaliers defeated the Chicago Bulls, Atlanta Hawks and then pushed the eventual NBA champion Golden State Warriors to six games in the finals.

Dellavedova earned $US816,000 last year with the Cavaliers.

Cleveland are facing a record luxury tax bill after shelling out $US47 million for James's new two-year deal, $US110 million for a five-year contract with forward Kevin Love, and $US40 million for four years with guard Iman Shumpert.

There were reports the Portland Trail Blazers were interested, but it appears no other clubs offered the Victorian a deal lucrative enough for him to leave Cleveland.

The Cavaliers, the favourites in the NBA's Eastern Conference, are tipped to challenge Western Conference favourites the Warriors or loaded up San Antonio Spurs in next years finals.

Despite his playoff heroics, Dellavedova's minutes with the Cavs will likely be reduced, with the team also signing veteran guard Mo Williams as another back-up for All-Star Kyrie Irving.

Dellavedova's contract is dwarfed by some of his Boomer teammates, with forward Aron Baynes recently signing for three years and $US20 million with the Detroit Pistons and Joe Ingles returning to the Utah Jazz on a two-year, $US4.5 million deal.

Spurs guard Patty Mills signed a three-years, $US12 million deal last year, and Andrew Bogut signed a three-year, $US36 million extension with the Warriors in 2013.

Dellavedova can cash in at the end of next season when his new contract expires, he becomes an unrestricted free agent and the NBA's salary cap significantly increases.