Google has warned the federal government of Australia that its high taxes could cause the country to miss out on AI and data center investment.

According to a report from the Australian Financial Review, the company is currently exploring where to establish a major Asia-Pacific AI and data center hub, valued at around AU$20 billion (US$14.2bn). While Australia is a leading candidate, the higher taxes in the country could prove a deterrent.

The company has told the government that it is concerned that if it set up such a hub in the country, the Australian Taxation Office could consider it a "permanent establishment" and thus would be exposed to a 30 percent corporate tax rate. Currently, Google leases capacity in data centers owned and operated by third-party companies in Australia.

This 30 percent tax rate would include Google's existing local cloud computing, search, and advertising operations, according to people familiar with the discussions - which were reportedly between Google's Bikash Koley and Australia's Treasurer Jim Chalmers, and held in November 2025 - told AFR.

A Google spokesperson told AFR that the company considers Australia to be a "generational opportunity" to become an AI and data center hub, and that it will continue to have "constructive discussions with local Australian partners and the federal government on the matter.”

The spokesperson added that Google is not asking for "incentives, public funds, or changes to the treatment of its existing businesses in Australia. 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.”

AFR reports that the existing data centers are much smaller than the AI data centers Google is now looking to develop. Additionally, much of the hyperscaler presence in Australia to date has seen the US cloud companies leasing capacity within Australian-operated colocation facilities.

The Australian Taxation Office (ATO) is currently investigating several of the world's largest technology companies due to concerns that projects from local data centers are being under-reported in Australia. Thus, the ATO is exploring whether the revenue should be taxed locally or booked offshore.

Also in Australia, Google is currently working on deploying subsea cable infrastructure. The company is establishing an outpost on Christmas Island as part of this, with a cable set to connect the island to Darwin in the north of the country.

The US tech giant is not shying away from major investments overseas. In October 2025, Google confirmed that it was spending US$15 billion on new data centers and other digital infrastructure in the Indian state of Andhra Pradesh.

Other hyperscalers with big plans for Australia include Amazon Web Services (AWS).

In July 2024, reports emerged that AWS was building a data center campus for Australia's government to handle top-secret information. The data center and cloud system will be developed as a partnership between AWS and the Australian government, and the latter will invest AU$2 billion (US$1.3bn) in the new system over the next ten years.