Christine Jiaxin Lee, 22, was alleged to have spent much of the sum on luxury items, such as jewellery and handbags.
The money was mistakenly made available to her by Westpac bank. Police had claimed the withdrawals in 2014 and 2015 constituted fraud.
The former Sydney University student opened the bank account in 2012 and had mistakenly been given an unlimited overdraft.
Money was then withdrawn over an 11-month period until the bank realised the error in 2015.
Prosecutors did not give a reason for withdrawing the charges.
Ms Lee's lawyer, Hugo Aston, said she was relieved.
"She has returned to Malaysia with her family and is happy to be getting back to her normal life," he told the BBC on Friday.
Many items purchased by Ms Lee had been seized and returned, Mr Aston said.
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