The Department of Defence said the system that won a tender in 2021 "would not meet strategic priorities", given the acceleration in space technologies and evolving threats.
"Instead of a single orbit solution, Defence must instead prioritise a multi-orbit capability increasing resilience for the Australian Defence Force," the department said in a statement on Monday, responding to media reports.
"This decision allows Defence to prioritise emerging needs, mitigate capability gaps and continue to support our transition to an integrated, focused force," it said.
Defence insisted its existing satellite communications capabilities supported its immediate needs.
Opposition defence spokesman Andrew Hastie believes national security is being neglected. (Lukas Coch/AAP PHOTOS)
Opposition defence spokesman Andrew Hastie said it was a "disgraceful decision" with Australia's national security being neglected because of "no leadership and no money".
"The cancellation of this project devastates our capabilities in strategic overwatch and our ability to co-ordinate our future defence force," he said.
The 2024 National Defence Strategy said Defence required space capabilities for boosting intelligence, surveillance and reconnaissance, providing resilient communications and countering emerging space threats.
The Integrated Investment Program included $9 billion to $12 billion for "enhanced space capabilities", including up to $7.2 billion for the JP9102 satellites that were intended to fend off cyber and electronic warfare attacks.
Defence said Lockheed Martin Australia "continues to be a highly valued industry partner" for current and future needs.
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