The short answer

The three levels of government and who controls what

Commonwealth, state or territory, and local bodies have different legal bases and responsibilities. Start with the law and funding chain rather than assuming the most visible politician controls the outcome.

This is a federal system guide. State constitutions, parliaments and local-government laws can allocate comparable functions differently.

The useful question is not only “what is the rule?” but also “who administers it, which document controls it, and when might it change?” That distinction prevents an accurate general explanation from becoming wrong advice in a particular election, chamber or policy setting.

Evidence review

Why three levels exist

Australia's federal structure was deliberately designed at Federation in 1901 to divide powers between a national government and the former colonies, which became the states. The Commonwealth was given a list of specific powers in section 51 of the Constitution covering matters such as defence, foreign affairs, currency, customs and excise, immigration, and interstate trade. Everything else was left to the states as residual powers, which is why state governments retain control over schools, hospitals, police, criminal law, most roads, and land use planning. This division was not an oversight but a deliberate compromise to persuade the colonies to join the federation while preserving significant autonomy. The Constitution also created the High Court of Australia to resolve disputes between the levels, and over more than a century its rulings have progressively shaped and sometimes shifted the boundaries of what each level can do. Local government is not mentioned in the Constitution at all. It exists purely under state legislation, which means a state parliament can create, abolish, restructure or override local councils as it sees fit. This constitutional invisibility has practical consequences: when local government seeks direct federal funding for projects such as community infrastructure, the legal mechanism typically runs through a section 96 grants power to the states, because the Commonwealth has no direct constitutional relationship with councils. Understanding these origins helps explain why responsibility for everyday matters is far more fragmented than it appears in political advertising or news headlines.

Evidence review

Commonwealth responsibilities and funding tools

The Commonwealth government collects the bulk of Australia's tax revenue through income tax, company tax, the goods and services tax, excise duties, and other levies. Under the Constitution, the Commonwealth has exclusive power over customs and excise, which means only the federal parliament can impose taxes on goods at the point of manufacture or import. This gives the Commonwealth enormous fiscal leverage over the states through what is known as vertical fiscal imbalance. The Commonwealth distributes GST revenue to the states through a formula administered by the Commonwealth Grants Commission, and it also makes specific-purpose payments tied to policy conditions in areas such as health, education, housing and infrastructure. In terms of direct service delivery, the Commonwealth runs Medicare, the Pharmaceutical Benefits Scheme, aged care funding and regulation, the National Disability Insurance Scheme, unemployment benefits through Services Australia, the aged pension, family tax benefits, immigration and border control, defence and national security, and the national broadcaster. It also controls competition policy, corporations law, telecommunications regulation, and international trade agreements. A frequent point of confusion in political debate is that while the Commonwealth may announce funding for a program, such as a new hospital or road project, the actual delivery of that service or infrastructure often falls to a state government or local council, meaning that Commonwealth money alone cannot guarantee an outcome unless the relevant delivery partner acts on it. This funding-delivery gap is one of the most important concepts to grasp when assessing whether a political promise from a federal election campaign can actually translate into something you will see in your community.

Evidence review

State and territory governments and their core domains

The six states and two self-governing territories operate their own parliaments, public services and legal systems, and together they are responsible for the majority of the services Australians interact with daily. State governments run public hospitals and the broader public health system, state schools and TAFE colleges, police forces and corrective services, most courts and the criminal law, major roads and public transport networks, land use planning and zoning, environmental protection and natural resource management, water supply and management, and emergency services including fire and ambulance. They also regulate private rental markets, residential tenancy laws, and strata title. When a politician makes a promise about hiring more police officers, building a new school, changing hospital funding, or altering planning rules to speed up housing construction, the level of government with the legal power to deliver that promise is nearly always a state government not the Commonwealth. This is why state elections, which receive far less national media attention than federal contests, often have more direct and immediate consequences for the daily lives of residents than a change of federal government. The territories occupy a slightly different legal position. The Australian Capital Territory and the Northern Territory were created by Commonwealth legislation and their self-government can in theory be altered or revoked by the Commonwealth parliament, although in practice such intervention is politically constrained. The territories do not have the constitutional status of states, which means Commonwealth laws can override territory laws more freely than they can override state laws, a distinction that occasionally becomes significant in policy areas such as voluntary assisted dying or drug law reform.

Evidence review

Local government powers and practical limits

Local councils are the most visible tier of government in the sense that they maintain the streets, parks, libraries, swimming pools and community facilities that people use every day, but they are also the most legally constrained. Councils derive all their powers from state legislation, typically a Local Government Act, which sets out their functions, revenue-raising capacity through rates and charges, and the oversight mechanisms that state governments can use to intervene in or dismiss councils. Council responsibilities typically include local roads and footpaths, waste collection and recycling, local planning and development approvals, building permits and inspections, public health regulation such as food safety inspections, community facilities and events, and some environmental health functions. Councils do not run schools, hospitals, or police, and they have very limited capacity to influence macroeconomic outcomes such as housing supply beyond their role in processing development applications on land that is already zoned for residential use by state planning frameworks. A common source of confusion arises when a resident is unhappy with a development in their neighbourhood and blames the council, when in fact the council may have been required under state planning law to approve a development that meets the zoning and design rules set by the state. Similarly, when a council is slow to approve a housing project, it may be because state-imposed infrastructure contribution requirements, environmental overlays or heritage protections have not been resolved, not because the council itself is acting arbitrarily. Understanding that councils operate within a legal framework set by the state helps citizens direct their advocacy and complaints to the level of government that can actually change the rule.

Evidence review

When levels overlap or conflict

Many of Australia's most contested policy problems arise precisely because the constitutional division of powers creates overlapping responsibilities that no single level of government can resolve alone. Health is a classic example: the Commonwealth funds general practice through Medicare and pharmaceuticals through the PBS, while states run public hospitals and employ doctors and nurses, and both levels contribute funding through the National Health Reform Agreement. When a hospital emergency department is overwhelmed, it is not immediately clear whether the problem is inadequate Commonwealth primary care funding, insufficient state hospital resourcing, or both. Housing is another area of deep overlap: the Commonwealth influences demand through tax settings such as negative gearing and capital gains tax discounts, provides direct funding through programs such as the Housing Australia Future Fund, and pays Commonwealth Rent Assistance directly to eligible renters, while states control land release, planning rules, social housing construction and tenancy laws, and councils decide individual development applications. When a politician promises to solve the housing crisis, a useful first question is to ask which of these levers they actually control from the office they are seeking. The National Cabinet, which brings together the Prime Minister, state premiers and territory chief ministers, was created to manage these overlaps, but its agreements are not legally binding in the same way as legislation, and they can break down when political incentives diverge. Federation is not broken when governments disagree; disagreement between levels was anticipated by the constitutional design, and the mechanisms for resolving it including intergovernmental agreements, tied grants, High Court challenges and referendums are themselves part of the system.

Evidence review

How to identify which level controls a specific issue

When you encounter a political claim about a problem or a promise to fix it, the most effective approach is not to guess which level of government is responsible but to trace the legal and funding chain. Start by asking which parliament passed the legislation that governs the area. If the matter is criminal law, for example, the relevant statute will almost always be a state act, and that tells you a state government is responsible even if a federal politician is campaigning on the issue. Next, check the funding source: Commonwealth money may flow into a state-run program through a National Partnership Agreement or a specific-purpose payment, but the delivery body remains the state. Look at the Budget papers for both the Commonwealth and the relevant state, because funding for a single program can appear in multiple budgets. For local issues, check whether a state planning policy, environmental regulation or infrastructure contribution scheme governs the decision before assuming the council has discretion. The Parliamentary Education Office and the Parliament of Australia website both provide plain-English guidance on the division of powers, and state government websites typically publish clear information about their responsibilities. Checking these sources before forming a view about who should be held accountable for a particular outcome is one of the simplest and most powerful habits a politically engaged citizen can develop. It also reduces the risk of being misled by political messaging that blames or credits the wrong level of government for electoral advantage.

Common questions

Before you rely on the answer

Why does the Commonwealth control so much money but the states run most services?

This arrangement flows from the Constitution, which gave the Commonwealth exclusive power over customs and excise the most significant revenue sources at Federation and later, through High Court rulings, a near-monopoly over income tax. The states retained responsibility for most service delivery areas such as health, education and policing. The resulting vertical fiscal imbalance means the Commonwealth collects far more revenue than it needs for its own direct responsibilities, while the states depend on Commonwealth grants to fund the services they are constitutionally obliged to provide. The GST is collected by the Commonwealth and distributed to the states according to a formula designed to achieve horizontal fiscal equalisation.

Can a local council be overruled by a state government on a development decision?

Yes. Local councils are created by and operate under state legislation. A state government can use planning powers to call in a development application and decide it directly, set state-level planning policies that councils must follow, or create a separate planning authority to handle certain classes of development. In some states, the planning minister has the power to approve projects that a council has rejected, or to set aside council planning schemes through a state environmental planning policy or equivalent instrument. This means blaming a council for a development outcome is sometimes misplaced if the real decision-making framework was set by the state.

How do I know if a federal election promise can actually be delivered?

Check whether the promised outcome requires action from a state government, a local council, or a private actor. If it does, the federal promise is contingent on the cooperation or independent decision of another party. Commonwealth governments can use tied grants to incentivise state action, but they cannot compel it in most areas of state residual power. A federal promise to build a specific road, for example, may depend on state land acquisition, planning approval and environmental assessment processes over which the Commonwealth has limited control. Examining the implementation chain before accepting a promise at face value is a core media literacy practice.

What happens when Commonwealth and state laws conflict?

Under section 109 of the Australian Constitution, when a valid Commonwealth law is inconsistent with a state law, the Commonwealth law prevails and the state law is inoperative to the extent of the inconsistency. However, this only applies where the Commonwealth has constitutional power to make the law in question. If the Commonwealth has passed a law outside its constitutional heads of power, the High Court can strike it down entirely. The territories do not have the same constitutional protection as states, so Commonwealth laws can override territory laws more readily, though political conventions constrain how this power is used in practice.

Source spine

Primary material used for this guide

Review trigger: Constitutional referendum result; High Court ruling that materially alters the division of powers between Commonwealth and states; legislation creating or abolishing a level of government or transferring major responsibility between levels; any change to GST distribution formula or vertical fiscal imbalance arrangements.

Archive note: This article describes the Australian federal system as it operates in mid-2026. Constitutional arrangements are stable but High Court interpretation evolves. The article should be reviewed within 12 months or sooner if a referendum, major intergovernmental agreement reform, or significant High Court decision on federal-state relations is handed down.

Primary links are provided without affiliate or tracking parameters. Confirm that the source still applies to the bill, sitting date, jurisdiction or reporting period before relying on it.