Law and government in Australia are based on a constitutional framework. This framework is essentially the product of the British legal system tempered by decisions which were required by the developing colonies. In 1788 when Captain Arthur Phillip claimed 'Terra Australis' for the British Crown, the reason that British law applied was because the colony was classified as 'settled' rather than 'conquered or ceded'.

This classification was crucial as it was the basis upon which the recognition or otherwise of the indigenous people was decided. If a colony were classified as 'settled', there was no recognition of any pre-existing system of law. The Australian continent was considered uninhabited and the first system of law to be applied was the British system. If, on the other hand, a colony were classified as 'conquered or ceded', the indigenous people's pre-existing legal system was implicitly recognised as operating at the time of conquest. A major criteria for the classification of colonies was whether crops were cultivated. As the Aborigines were a hunter/gatherer people with no evidence of cultivation, at least as the Europeans understood the idea, Australia was classified as 'uninhabited' available to be 'settled' and, as a consequence, the British law applied. This is not to say that the Aborigines did not have a system of law; rather that the Europeans failed to recognise and understand the complex system of law which governed the relationships between and within tribal groups and ruled the vital relationships of the people and the land. As a 'settled' country all the British law, both statute and common law, relevant to the new colonies applied.

In the case of Eddie Mabo and Others v The State of Queensland 1992, the High Court overturned the concept that no previous system of land title existed before European settlement. It recognised the native title of a group of Torres Strait Islanders who could establish a direct and continuous association with their land since before European settlement. Four years later, in the case of The Wik Peoples v The State of Queensland, 1996, the principle in the Mabo case was extended when the High Court recognised for the first time the native title of another Aboriginal group to an area which had been subject to a pastoral lease where there was no inconsistency between the two forms of landholding. Following the decision in Mabo's case the Commonwealth Government passed the Native Title Act 1993 (Cth) which established a tribunal and court process to investigate claims of native title and to provide compensation where the legislation resulted in the loss of native title. This legislation was further amended after the Wik decision.

The growth of the colonies and the distance from England created pressures for autonomous governments and legal systems and eventually each settlement was regarded as substantially independent with power to make its own laws for the peace, welfare and good government of its people. Economic factors, as well as fear of invasion by other nations, were instrumental in a push towards unification of the colonies and after a series of constitutional conventions in the 1890's Australia became a nation on 1 January 1901.

The Commonwealth Constitution is contained in an Act of the British Parliament passed in 1900 setting out the terms of agreement reached between the Australian colonies for an Australia-wide Federation. It establishes the Commonwealth Parliament, Government and the Federal court system (in particular, the High Court). The limited list of powers of the Commonwealth Parliament includes interstate and foreign trade and commerce, taxation, postal, telephonic and similar services (this includes television), defence, fisheries beyond the State's limit, currency and coinage, banking and insurance, bankruptcy, trading and financial corporations, marriage and divorce, various social services, minority racial groups (including Aborigines), migration, foreign affairs and industrial conciliation and arbitration of interstate industrial disputes [Commonwealth Constitution s 52]. On the other hand, the South Australian Constitution Act 1934 (SA) gives the State Parliament general power to legislate for the State. Unlike the Commonwealth Parliament, the legislative power of State Parliaments is not restricted to a specified list of subject matters. The only exclusions from State legislative power are certain subject matters given exclusively to the Commonwealth by the Federal Constitution, such as the power to impose duties of customs and excise [s.90], and the power to coin money [s.115]. There are also a few prohibitions on the activities of both Commonwealth and States. The most important prohibit laws and governmental action which restrict the freedom of interstate trade, commerce or intercourse [s.92].

It is possible for the Commonwealth and a State to make laws on the same subject matter. Provided there is no general prohibition and that it is not a subject on which the Commonwealth has exclusive power, either can make a law. However, if the laws conflict, the Commonwealth Constitution s 109 provides that the Commonwealth law prevails. To the extent of the inconsistency, the State law is of no effect. Despite the apparently sharp differences in their powers, the State and Commonwealth governments are often involved in the same projects. Their degree of involvement will vary according to their constitutional power. Even in areas beyond its strict legislative power, the Commonwealth may still get involved through the provision of financial assistance, as it has done with education and health. In addition to the varying powers the State and Federal Parliaments have over, for example, the environment, there are variations in the amount and type of power each Parliament has given its Ministers, government departments and citizens. A Parliament, in some Acts, will give a wide discretion to a Minister to control the way the Act is enforced. In other Acts, a government department will be given considerable powers. Each Act must be looked at to decide whether a Minister or a government department's decision is valid or can be challenged, see Complaints against government.