Sydney could once again be home to Australian submarines after new documents reveal the Department of Defence is considering housing at least part of the new fleet within the city's famous harbour.

A report obtained by South Australian Senator Rex Patrick through a freedom of information request suggests the Royal Australian Navy wants some of the new fleet of 12 submarines due in 2032 to be based in Sydney.

The options include Garden Island, HMAS Waterhen at Balls Head and Cockatoo Island.

An aerial view of HMAS Platypus in 1990 — the former base for Sydney's submarines. ( Supplied: Royal Australian Navy )

Senator Patrick, a former submariner, said not having the entire fleet in Perth — the Navy's current home for its fleet — would be a sensible strategic move.

"The report suggests that's a vulnerability in some sense," he said.

"But also we want to have a disposition for our submarine force where we can respond to events on the eastern side of the nation as well, so we have a two-ocean policy.

"We've also seen just recently soft power being used by China in East Timor and indeed there have been suggestions there might be a Chinese naval base in Vanuatu.

"So the South Pacific, the Coral Sea, the eastern Indonesian archipelago will heat up over the next decade."

The report suggests having six submarines in Perth and only three in Sydney, with the new fleet not expected to be finished until the early 2030s.

Submarines and Sydney

If the decision to house the new submarine fleet in Sydney were to go ahead, it would mark a return to the Sydney Harbour — a place that has quite a history with the Navy vessels.

Up until 1999, Australia's submarine fleet was based at HMAS Platypus in Neutral Bay, a stone's throw from Sydney Harbour Bridge.

That previously served as gasworks to power Sydney's lights from 1876 to the late 1930s, and then as a torpedo factory during World War II.

The torpedo factory at the Neutral Bay site. ( ABC News: Harbour Trust )

According to Royal Australian Navy archives, a different site, HMAS Penguin at Balmoral in Sydney, had been used by the submarines of the Fourth Submarine Squadron after WWII but it was deemed unsuitable as a permanent establishment due to its "exposed position".

The site at Neutral Bay was chosen because availability of land close to an existing site, on a bay well protected from the weather made it "an ideal location for a naval establishment".

A submarine leaving the dock at Neutral Bay. ( Supplied: State Library NSW )

On November 1964, an announcement was made that Neutral Bay had been selected.

It closed in 1999 before the fleet was moved to Western Australia. It is now part of an urban renewal project, part of which opened to the public in May.

WWII — the mini submarine hit

Last year marked the 75th anniversary of, arguably, Sydney's most famous experience with submarines.

On May 31, 1942, under the cover of darkness, a group of Japanese midget submarines secretly cruised into Sydney Harbour and launched an attack.

It was an attack that brought WWII to the city's doorstep.

A Japanese midget submarine retrieved from Sydney Harbour in 1942. ( Supplied: Ronald Noel Keam (060696)/Australian War Memorial )

Twenty-one Australian and British sailors were killed when a converted ferry, the HMAS Kuttabul, was sunk by a torpedo in the surprise naval offensive that shocked Sydney.

The three two-man Japanese submarines had been deployed off the Sydney coast with an aim to sink the USS Chicago and any other allied warships inside the harbour.

Two of the vessels were detected and failed. A full-scale search of the harbour found the third submarine, which evaded fire and launched two torpedos at the USS Chicago, its prime target.

The torpedos missed with one of the explosions splitting another boat the HMAS Kuttabul in half, causing the fatalities.

Where now?

Senator Patrick said any future development in Sydney Harbour would require extensive infrastructure to fit the new base into an already crowded area, which would soon feature Hunter class frigates.

"The future frigates, the Hunter class, will in actual fact replace the Anzac classes which are already operating out of Garden Island," Senator Patrick said.

A submarine being tested off the Adelaide coast. ( ABC News )

In a statement, Defence Minister Marise Payne said the department was continuing to investigate long-term basing options for an expanded submarine fleet.

"No decisions have been made on the basing of the future submarine fleet as the first boat is not expected to enter service until the early 2030s," she said.

"A range of initial submarine basing options are expected to be presented by Defence to the Government for consideration in late 2019."