Google has reportedly paused plans for a $20 billion AI and data centre hub in Australia, amid concerns the move could expose the company to a higher tax rate across its local operations – a stance former Industry Minister Ed Husic has labelled “extortionate”.

The Australian Financial Review (AFR) this week reported that Google had told the Australian government that it was withholding the $20 billion data centre pledge due to the tax-related concerns.

Documents released under a Freedom of Information request have also revealed that Treasurer Jim Chalmers and a number of high-level government officials met with the Google vice-president of Global Infrastructure and Capacity late last year.

A spokesperson for Google has said that the tech giant is not seeking any tax incentives, while Australia’s peak data centre body is pushing for further regulatory and policy certainty.

Plans for a data centre hub

Google is currently deciding where to build the AI and data centre hub in Asia, with Australia considered a leading contender.

However, the company is concerned that establishing the hub locally could prompt the Australian Taxation Office to deem it to have a “permanent establishment” in Australia — potentially subjecting its broader operations to the 30 per cent corporate tax rate.

This is higher than the rate Google currently pays on services delivered to Australian customers via offshore entities.

According to its 2024 tax transparency report, Google recorded an effective tax rate of 20 per cent in Australia, paying $83 million in income tax.

A spokesperson described the moment as a “generational opportunity” for Australia and said the company “continues to have constructive discussions with local Australian partners and the federal government on the matter”.

“Google is not asking for incentives, public funds or changes to the treatment of its existing businesses in Australia,” the spokesperson told Information Age.

“We have a proud track record of investing in our operations and digital infrastructure in Australia, including through multiple subsea cables and cloud regions in Sydney and Melbourne that enhance connectivity and digital capabilities.”

Following the reports, Assistant Treasurer Daniel Mulino said the tax issue was an “important one” that would be “worked through” by the government.

‘Extortionate’

Former Industry Minister Ed Husic criticised Google’s position, calling it “extortionate” on social media.

“At this point there are more downsides to data centres build than upside, so Google pay your tax, we’re good,” Husic posted.

Data Centres Australia, whose members include AirTrunk, AWS, Microsoft and TikTok, said operators are not seeking tax breaks but want policy stability.

Pipes in Google's brand colours carry the cooling water around a data centre in the US. Photo: Google Data Centres

“Data centre operators in Australia do not receive, and our members aren’t asking for, tax incentives,” CEO Belinda Dennett told Information Age.

“Australia is an attractive place for data centre investment with good land availability, abundant renewable energy, five eyes security partner and skilled workforce.

“But regulatory and policy certainty are also incredibly important for long-term investment decisions like data centres. Capital is mobile and the competition to attract this investment is fierce.”

Google is not a member of Data Centres Australia.

High-level meeting

Late last year, Chalmers, Finance Minister Katy Gallagher, Industry and Innovation Minister Tim Ayres and Assistant Minister for Science, Technology and Digital Economy Andrew Charlton, along with the secretaries of Treasury and the Department of Industry, Science and Resources, met with Google executives.

They met with Google vice-president of Global Infrastructure and Capacity Bikash Koley, along with Google Australia and New Zealand vice-president and managing director Mel Silva.

According to briefing notes prepared for Chalmers and released this month under an FOI request, the Treasurer noted that Australia was already an “attractive destination for investment in data centres”, thanks to the availability of land, the potential for renewable energy, regulatory and political stability, and proximity to markets in the Asia-Pacific.

Federal and state governments have made sustained efforts in recent years to attract data centre investment.

Last year, Amazon announced it would significantly increase its investment in Australian data centres to $20 billion from 2025 to 2029, while the NSW government recently approved CDC Data Centre’s $3.1 billion hyperscale data centre, set to be the largest in the southern hemisphere.

Google itself announced a $1 billion investment in Australia in late 2021.

However, tensions between the company and the federal government have persisted, including over the News Media Bargaining Code and, more recently, the inclusion of YouTube in the social media age ban.