Australia’s Commonwealth, State and Territory governments are currently considering their data centre policy and regulation to facilitate investment in the sector and ameliorate the impacts of development on water, energy and the amenity of host communities.

In March 2026, the Commonwealth Government published its ‘Expectations of data centres and AI infrastructure developers’, confirming that the Government will prioritise in its regulatory assessment data centre proposals that positively contribute to Australia’s renewable energy transition and minimise disruptions to water and energy supply.  The Government subsequently announced that it would work with State and Territory Governments to provide clear standards for data centre developments. The August 2026 National Cabinet agreement confirmed that the Commonwealth Government would develop nationally consistent mandatory standards for data centres to provide clarity for stakeholders around energy, water and land-use.

The Commonwealth Government has indicated that it will introduce legislation establishing AI standards in early 2027 informed by the recent Consultation Paper, ‘Getting it right: Building AI infrastructure that works for Australia’. The standards will include mandatory minimum requirements for large data centres and expectations including that data centre developments offset their energy demand by contributing to Australia’s renewable energy goals, implement transparent, sustainable and efficient water saving measures to prevent supply disruptions, and be appropriately sited to avoid or minimise amenity impacts on host communities.

Existing processes for approvals will be retained, with the States remaining responsible for the planning process. Against this backdrop, New South Wales and Victoria have introduced further policy guidance for data centre stakeholders.

New South Wales

The New South Wales Government released its ‘Data Centre Policy Framework’ and ‘Data Centre Guidelines’ in August 2026 following extensive stakeholder consultation. The Framework and Guidelines outline the Government’s support and expectations for efficient, sustainable and socially acceptable data centre development.

The Guidelines are consistent with the Commonwealth’s expectations and intend to provide greater certainty and transparency in the process for data centre planning applications. Expectations that proponents are to meet in their planning application, include:

• demonstrating world-class environmental and efficiency standards for the use of energy and water and the minimisation of air and noise pollution.
• no adverse affect on consumers and communities, including by reducing grid demand, covering the costs of supporting infrastructure and appropriate siting in locations next to critical infrastructure to minimise disruptions to host communities.
• investing in renewable energy and water supply to offset their consumption.
• improving sustainability outcomes, including by adopting circular economy and carbon measurement frameworks.

Victoria

The Victorian Government released its ‘Sustainable Data Centre Action Plan’ in September 2026, following the National Cabinet agreement, intended to align with the ‘Australian Government Expectations’.

The Action Plan clarifies the Victorian Government’s expectations of data centre developments. The key expectations and performance measures for data centre developments, include:

• Proposed data centres are prohibited from residential zones. Further, proposed data centres are prohibited from rural areas unless the development is situated near and able to be serviced by supporting infrastructure.
• Data centres must minimise their impacts on host communities, including in relation to noise and air quality and disruption to communities during construction.
• requirements to offset their energy demand by investing in renewable energy generation and capacity, ensuring energy efficiency, and covering the costs of infrastructure upgrades required for the data centre.
• requirements to meet the full cost of water infrastructure including the use of non-drinking water for cooling or replacement of their usage and implementation of water efficiency measures.

The Action Plan will be reviewed as conditions evolve and foreshadows the development in 2027 of a statewide planning policy to provide siting, design and built-form guidance. Similarly, the New South Wales Government will review their Guidelines annually, or as required to respond to significant changes in the sector.

These policies reflect Government support for data centre investment while balancing community concerns through clear expectations of developments in the planning and approvals process.