The Australian Taxation Office (ATO) has signed a AU$104.8 million (US$72.5bn) IBM mainframe contract.

As reported by iTNews, the new agreement is part of the department's modernization program signed in 2023, and will see the ATO adopting IBM's latest z17 mainframe.

The original modernization program was to migrate the tax office off its z14 mainframe to a z16 mainframe, but was quietly extended in early January. The original contract was valued at AU$87.7 million (US$60.67m), expanding to AU$192.5 million (US$133.16m) through the extension. The extension also adds three years to the program.

IBM made its latest generation mainframe, the z17, available in June 2025. The z17 features a second-generation on-chip AI accelerator built on the IBM Telum II processor, and can process 50 percent more AI inference operations per day than its predecessor, the z16.

An ATO spokesperson told iTNews that it hopes the modernization of the mainframe platform, along with new capabilities, will increase "value to the organization and our services."

The previous z14 to z16 upgrade was completed in 2024. The company will now use the z17 until around mid-2031, under the current contract.

Also in Australia, the Department of Home Affairs has added two and a half years to its own contract with IBM, though this covers non-mainframe environments.

Valued at AU$35m (US$24.21m), the extension brings the total contract up to AU$103m (US$71.25m) and covers hardware and software maintenance and support. The contract was procured through the whole-of-government arrangement between the Digital Transformation Agency and IBM.

The Home Affairs department was previously one of the many government departments to use Global Switch data centers in Australia. After it was demanded that they exit the company's facilities, Home Affairs migrated to Canberra Data Centres facilities.

In December 2025, Australia's Digital Transformation Agency (DTA) called for a nationwide government effort to adopt more cloud computing solutions. The policy did not rule against on-premises compute but said: "Prioritizing cloud computing means that agencies should consider cloud for new digital initiatives, prioritise moving off legacy systems and transition to cloud where it makes sense to do so, and consider hybrid or multi-cloud models when pure cloud solutions are not justified."