Australia has introduced a prioritisation framework for new and expanded data centre and AI compute projects. Federally, the Commonwealth Expectations (“Expectations”) of data centres and AI infrastructure developers set the project attributes that will underpin a project’s “social licence” and influence which proposals are prioritised through Commonwealth regulatory processes.
Summary
- The Expectations flow directly from the National AI Plan, which identifies sovereign digital infrastructure as a strategic priority for an AI-enabled economy and sets an explicit goal of attracting global hyperscalers and cloud providers to build capacity onshore.
- In New South Wales (NSW), the government is pairing a fast‑track pathway for selected major projects with a principles‑based strategy now being consulted on (submissions close May 8, 2026).
How the Expectations work in practice
- The Australian government processes will prioritise proposals that best demonstrate alignment with the Expectations.
- Energy‑intensive projects that cannot evidence alignment should expect slower pathways and higher execution risk.
- Expect closer Commonwealth–state coordination as the framework is implemented.
What this means for data centre developers and their sponsors
- Alignment with principles-based government expectations is now a gating issue.
- Treat the Expectations as bankability and deliverability tests to be built into siting, energy and water strategy, customer contracting, and financing from day one.
- Expect renewed focus from regulators on:
- energy and water sourcing and efficiency, and grid impacts—this will be amplified for GPU-enabled facilities
- community engagement and local benefit sharing and
- contributions to Australian skills, job creation, innovation, and research capability.
With the release of the National AI Plan in December 2025, and these new Expectations, Australia is positioning itself as the leading data centre and AI compute hub for the Indo-Pacific region. For inbound investors, the combination of political stability, reliable rule of law, technological forward thinking, proximity to fast-growing Asian markets (while being positioned far from conflict zones), established submarine cable connectivity, and a rapidly maturing regulatory framework makes Australia an attractive destination.
The Australian government’s clear intention is that the Expectations will accelerate, rather than impede, investment. Whether and at what pace that will happen in practice remains to be seen, but the industry’s reaction has so far been generally positive.
The Commonwealth Expectations: the new “alignment test” for prioritisation
Government agencies will test data centre proposals against the following core Expectations:
- Prioritising Australia’s national interest: including resilience and national security considerations and credible community engagement.
- Supporting Australia’s energy transition: including credible power strategies and not shifting grid costs to consumers.
- Using water sustainably and responsibly: with robust water strategy and local impacts addressed.
- Investing in Australian skills and jobs: tangible commitments, not aspirational statements.
- Strengthening research, innovation, and local capability: including ecosystem participation where relevant to the project model.
The Expectations apply to new or expanded developments in Australia, including colocation sites, hyperscale operations and large‑scale AI compute centres (but excluding small edge/on‑site enterprise facilities).
While the Expectations do not create new regulatory obligations, they set up a practical approvals framework that will sit alongside an increasingly active regulatory environment for critical infrastructure, which includes existing cyber security, national interest, merger control, and foreign investment regulations.
For developers and financiers, the practical shift is that regulatory readiness is no longer a “late-stage” legal check. It is a multi-agency process that can determine sequencing, design decisions, customer eligibility and, ultimately, “time-to-power” risk for data centre projects
NSW’s Investment Delivery Authority is fast-tracking selected major projects
New South Wales is translating the “alignment test” into faster delivery for projects that are investment‑ready and infrastructure‑credible.
15 major data centre projects will progress via the Investment Delivery Authority (IDA), representing around AUD51.9 billion of potential private investment. These projects will benefit from whole‑of‑government coordination and fast‑track pathways. A material number of proposals were not endorsed, underlining that readiness and infrastructure impact (not just scale) now drive prioritisation.
NSW has also released a Data Centre Consultation Paper to shape a statewide strategy. This focuses on managing growth as critical infrastructure, particularly energy, demand water use, network capacity and community impacts. It remains to be seen how these will differ from the Expectations.
AI workloads and the emergence of GPU-enabled capacity
AI is reshaping both demand and design assumptions. Higher density halls, more sophisticated cooling solutions and tighter performance tolerances are becoming common, particularly where facilities are intended to support training and inference workloads.
Across our global network, we are seeing that AI has driven interest in Graphics Processing Unit (GPU)-enabled compute offerings, including GPU-as-a-Service and capacity reservation models layered on top of traditional colocation. These models typically amplify the very impacts that the Expectations are designed to manage, such as energy intensity, water/cooling demands, and security/resilience considerations, and so will require even more careful navigation of the regulatory web.
On the energy front, it will be interesting to see whether the Expectations drive more behind-the-meter and other “captive” power strategies in Australia, alongside traditional grid-based solutions, particularly for GPU-enabled facilities. This includes co-located battery energy storage systems, combined with onsite generation and advanced energy management, deployed to improve resilience, manage peak demand, and mitigate exposure to price volatility.
While potentially mitigating one of the critical issues facing data centre developments (i.e., access to power), the use of captive power solutions can bring their own technical, bankability, and regulatory considerations, and should be considered early in the data centre investment planning process.
Data centre customers should also expect alignment with Expectations and compliance obligations to feature in contracts, especially for AI-dense/GPU-aaS models, in the form of power commitments, transparency metrics, security assurance (often mapped to critical infrastructure expectations such as the Security of Critical Infrastructure (SOCI) regime where applicable), and tougher commissioning/acceptance processes.
National security, foreign investment, and the Hosting Certification Framework
For inbound investors, the national security and sovereignty dimension of data centre investment in Australia warrants close attention. Foreign investment approvals can be required depending on asset type, location, and ownership structure, and data being stored, particularly where data centres intersect with sensitive data or critical infrastructure (including grid-connected power solutions).
Recent policy settings indicate a more risk-based approach, with greater scrutiny of sensitive investments and streamlined processing for lower risk repeat investors. Australian Treasury typically seeks to apply what has become a standard set of conditions to foreign investment approvals, primarily focused on access to data restrictions, which investors negotiate on the facts of the relevant transaction.
The SOCI regime has also evolved in ways that are relevant to data centre operators, particularly where facilities host or support systems connected to critical infrastructure assets. SOCI obligations increasingly influence governance frameworks, cyber incident readiness, and ongoing compliance costs, and are now commonly treated as part of the post-acquisition operating model rather than a one-off regulatory hurdle.
For assets targeting government workloads, the Hosting Certification Framework (HCF) is an additional consideration. Security certification under the framework is a prerequisite for hosting certain categories of Australian government data and systems. The framework is currently undergoing reform, and aspects of the certification process have been paused, which can affect timing assumptions for new entrants or expanding providers.
Critically, the HCF incorporates a “Relevant Change” mechanism: certain changes in the ownership, control, personnel, or operational arrangements of a certified hosting provider can trigger a requirement to notify the certifying authority and, in some cases, to undergo reassessment or re-certification. For investors, this means that an acquisition, change of control or material restructuring of a certified facility, or its upstream holding structure, may constitute a Relevant Change, potentially affecting the facility’s certification status and its eligibility to host government workloads.
This is of particular significance because government tenants (and hyperscalers who on-provide hosting and cloud services to government agencies) are frequently anchor tenants at major Australian data centre facilities. Their presence underpins revenue stability and often supports the financing case for projects.
However, their tenancies are contingent on the facility maintaining appropriate HCF certification. An investor acquiring a facility with government or government-adjacent anchor tenants must therefore assess HCF certification status, the scope of any Relevant Change notifications that may be triggered by the transaction, and the risk that a change of control could result in the loss or suspension of certification, and with it, the loss of key tenancies.
Structuring Foreign Investment Review Board (FIRB) applications and transaction documentation to address HCF continuity is becoming an essential part of the due diligence and deal execution process for data centre investments in Australia.
What investors and developers should do now
For investors and developers
- Run federal/NSW alignment as a core development workstream (siting, power, water, community) and elevate regulatory readiness (including SOCI and cyber uplift where relevant) into the critical path from day one.
- Build an evidence pack early and try to keep it consistent across government agencies (including for foreign investment approvals), utility engagement, community materials, and financing disclosure.
- Engage early on foreign investment approvals, consider HCF aspects and applicability of SOCI obligations.
- Where you are developing GPU-dense halls or GPU-aaS, include an annex covering tenant governance, security/auditability, and operational resilience, to shorten regulator, customer and lender diligence cycles.
- Consider partnering with established local operators. The Expectations’ emphasis on Australian skills, jobs, and local capability means that proposals demonstrating experienced local management, established contractor and supply chain relationships, and workforce development commitments will be better positioned for prioritisation. For inbound investors without an existing Australian platform, partnering with or acquiring alongside an established local data centre operator can materially strengthen a proposal’s alignment case and de-risk execution.
For lenders
- Pay close attention to the status of regulatory approvals and alignment with Commonwealth Expectations when making funding decisions.
- For projects seeking funding prior to relevant regulatory approvals being in place, consider the impact of Commonwealth Expectations alignment on deliverability and timeframe. This can be particularly relevant for pre-FID development expenditure (or “devex”) and portfolio funding solutions, where alignment may become one of the drivers for valuation, and therefore gearing.
- Price and paper for prioritisation and time‑to‑power risk: diligence/ Conditions Precedent should cover alignment evidence, power solution including grid connection and funding, water strategy, approvals sequencing, and regulatory compliance pathway (including SOCI scoping, cyber/operational resilience uplift, and any heightened considerations for GPU-dense or GPU-aaS offerings).
For investors, developers, and lenders
- Diligence alignment with the Commonwealth Expectations as a gating issue: assess the target’s energy and water sourcing strategies, community engagement track record, and any commitments made to regulators or planning authorities in securing approvals. A failure to align translates directly into slower approvals pathways, reduced prioritisation prospects, and higher execution risk for expansion or redevelopment.
- Review customer contracts for alignment-related obligations: expect power commitments, transparency metrics, security assurance mapped to SOCI, and tougher commissioning/acceptance processes to feature increasingly in data centre customer contracts, especially for AI-dense and GPU-aaS models—assess whether the target’s operational capabilities can meet the evolving standard and build any shortfall into the deal model and SPA protections.
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