Victoria's Sustainable Data Centre Action Plan: what developers need to know

On 22 September 2026, the Victorian Government released its new Sustainable Data Centre Action Plan, signalling a significant shift in the assessment of new data centre projects.

While the Plan is not yet law, it points to a more prescriptive planning approval framework in which energy supply, water use and site suitability will become central feasibility considerations.

The Plan also supports the Commonwealth's move towards nationally consistent standards for data centres covering energy, water and land-use impacts.

Key proposed planning changes

• New land use term - Planning schemes will define "data centre" as land used to collect, distribute, process or store digital data. It does not include collecting, distributing, processing, or storing digital data if it is ancillary to another use of the land.
• Residential zones and 150m buffer - Data centres will be prohibited on residential zoned land, and a 150m buffer between a residential building and a proposed data centre building will be introduced and enforced via the planning system.
• Rural zones - Prohibited unless located near and able to be serviced by critical infrastructure, such as major transmission infrastructure, substations, renewable energy facilities, battery storage or recycled water infrastructure. This sits alongside the existing 2024 commitment to prohibit new data centres in the Green Wedge Zone.
• Referrals - The Victorian Planning Provisions will be amended to extend referral status to WorkSafe Victoria, Fire Rescue Victoria, VicGrid and the relevant water corporation for all data centre applications, including those determined by councils (in addition to EPA).
• Further policy - A statewide planning policy will guide location, design, scale and infrastructure.

Beyond planning

The Plan also sets energy, water and community requirements:

• Operators must offset actual operational electricity use by investing in new renewable generation and storage, and cover all connection costs and network augmentations, including necessary upstream augmentations.
• Water-intensive cooling is expected to use recycled or non-drinking water or be covered by a transition agreement with the water corporation, with interim drinking water to be offset. Design water usage effectiveness (dWUE) targets are ≤1.0 (potable) or ≤1.6 (non-potable), unless otherwise agreed with the water corporation.
• A Local Investment Guarantee is still to be developed with local government and industry.
• Transitional position - The Premier's release states that the new rules won't be retrospective for applications under assessment.

What this means for developers

• Revisit site due diligence - The buffer is measured between buildings, not from a zone boundary. Industrial land at residential interfaces may therefore lose developable area.
• Timing matters - Protection is currently framed around applications "under assessment". The detail of the transitional provisions in the eventual amendment, including how amended applications are treated, will be critical.
• Energy and water are now feasibility issues - Early engagement with the water corporation, VicGrid and the network service provider is essential. The Investment Front Door is the single entry point to government for major data centre investments.
• Watch the Commonwealth - Commonwealth legislation is intended for early 2027, and the compliance detail for the "bring your own supply" requirement will be finalised in step with it.

Next steps

The Plan does not specify a timeframe for implementing the proposed planning scheme amendments. It indicates that detailed siting, design and built-form guidance will be developed with stakeholder input during 2027.

The Plan also anticipates that Victoria's planning and approval framework will operate alongside emerging Commonwealth standards for data centres. Commonwealth legislation is expected in early 2027.

For further information on the Plan and its potential implications for your projects or interests, please contact our Environment & Planning, Energy Transition, or Real Estate & Projects teams.