Minister for Defence Senator Marise Payne confirmed on Monday the barracks will be revitalised, with public accessibility to the site increased under the Launceston City Deal.
"Defence has been part of the Launceston community for a long time and our commitment to the region will continue," Minister Payne said.
"We will invest around $5 million to build new fit-for-purpose facilities for 16 Troop at the larger Youngtown Barracks site."
Paterson Barracks precinct is heritage listed on both Commonwealth and Tasmanian registers. The federal government has said it will work with the Tasmanian government, City of Launceston and the community on any re-development proposal to ensure heritage values are protected.
"The Commissariat Building at Paterson Barracks, built in 1828, is one of the oldest surviving buildings in Launceston and its heritage listing ensures it will be preserved for future generations," said Minister Payne.
Assistant minister for cities Angus Taylor said the government would look into opportunities for the site to deliver wider economic benefits to Launceston and contribute to the vibrancy and renewal of the city.
"I welcome the opportunity for this important inner city parcel of land to be included in Launceston’s updated city master plan, and for any potential development to form a part of the Launceston City Deal," Taylor said.
"City Deals are living, strategic plans backing the interests of the local community. Over the longer term, the City Deal will help position Launceston as one of Australia’s most liveable and innovative regional cities."
Defence will also provide $250,000 to the University of Tasmania to support the development of a business case for a Defence Innovation and Design Precinct. This investment will be matched by an additional $125,000 each from the Tasmanian state government and the University of Tasmania.
A Defence Innovation and Design Precinct and a community led master plan for the UTAS Newnham campus presents an exciting new future for Launceston’s northern suburbs after the $260 million relocation of the university to Inveresk.
City of Launceston Mayor Albert Van Zetten said the Paterson Barracks site held a special place in the city’s history.
"We welcome the opportunity to commence work on an updated integrated plan for our central city area, inviting the local community to have its say on any future re-development of the precinct," Mayor Van Zetten said.
"This is a strategically located area of the city, between the CBD and the riverfront, and it will be exciting to consider how it could be utilised in the future.
"We look forward to working with the Commonwealth and Tasmanian governments to prioritise and enhance the heritage values of this site."