Tracks Music Festival was cancelled on Thursday, just two days before it was due to go ahead.
It sees the loss of three years of hard work and planning for organiser Paddy O'Brien.
The decision to cancel was a "very difficult" one, he said.
"With acts, staff and contractors all out of action with the virus, as well as government restrictions, we will be unable to create an event to the standard that attendees expect and have paid for," O'Brien said.
"We are devastated that all the work and effort has not come through for this one, we were so excited to show you all what we had in store."
Earmarked for January 8, Tracks Music Festival was to host bands Harvey Sutherland, CC:Disco!, Bradley Zero and Sunnyside for the one day event in the heart of Warrnambool.
Alongside the headliners was be the south-west's Gub, Liquid Sessions and Raglan DJ's, as well as Melbourne's Oscar Milde & Tids.
"We couldn't in good conscience run the event," O'Brien said.
"Financially it's a huge hit, you take a big loss upfront and it's a big cost personally.
"It has flow on effects for all the contractors, staff and performers."
There was too much uncertainty to plan a replacement date, with all tickets refunded in full, he said.
Two artists were flown in from overseas for the Warrnambool event.
"It's really damaged people's confidence in investing in the arts, there's not enough infrastructure or support for the arts," O'Brien said.
He's calling for the community to support live music to make events like Tracks possible in the future.
"We ask really that you invest where you can and when things start to reoccur to get on board."
O'Brien is behind the popular Warrnambool Laneway Bar, a pop-up venue in the heart of the city that draws young crowds for a sundown drink and a boogie through summer.
Tracks Festival was be held in the same location as his other successful venture near the train station, Warrnambool Food Truck Festival, which drew crowds for a day of live entertainment and food last year.
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