Facebook will stop Australian users and organisations from sharing and viewing local and international news in response to the government's proposed media bargaining code.
Both Google and Facebook have threatened to partly withdraw service offerings in Australia if the government forces them to pay news publishers.
Facebook managing director for Australia and New Zealand, Will Easton, said in a blog post that the proposed legislation penalises the social network for content it did not take or ask for, instead of encouraging innovation between digital platforms and news organisations.
"The proposed law fundamentally misunderstands the relationship between our platform and publishers who use it to share news content," Easton wrote.
"It has left us facing a stark choice: attempt to comply with a law that ignores the realities of this relationship, or stop allowing news content on our services in Australia.
"With a heavy heart, we are choosing the latter."
The content restriction takes effect immediately, and means Australian publishers cannot share or post any content on Facebook Pages.
Content posted by international publishers cannot be viewed or shared by Australians.
Australian Facebook users, in turn, will not be able to view or share local and international news content.
And international audiences "cannot view or share Australian news content on Facebook or content from Australian news pages".
The media bargaining code attempts to force digital platforms like Google and Facebook to negotiate payments to news organisations.
A binding "final offer" arbitration process - if no agreement can be reached between the parties - will also be introduced in the code, which is expected to pass into law next week.
Easton said there is minimal business gain from news for Facebook, as it makes up less than four percent of the content users see in their timelines.
By comparison, Easton said that in 2020, Facebook generated around 5.1 billion referrals for free for Australian publishers.
While Google has struck several deals with publishers in recent days, Easton argued that Facebook has a fundamentally different relationship with news.
"Google Search is inextricably intertwined with news and publishers do not voluntarily provide their content," Easton said.
"On the other hand, publishers willingly choose to post news on Facebook, as it allows them to sell more subscriptions, grow their audiences and increase advertising revenue." he added.