The Commonwealth of Australia is a federal constitutional monarchy under a parliamentary democracy. The Commonwealth of Australia was formed in 1901 as a result of an agreement part self-governing British colonies, which became the states. The terms of this agreement are embodied in the Australian Constitution, which was drawn up at a Constitutional Convention and ratified by the people of the colonies at referenda. The structure of the Australian Government may be examined in light of distinct concepts, namely federalism and the separation of powers into legislative, executive and judiciary branches of government. Separation of powers is implied from the structure of the Constitution which breaks down the branches of government into separate chapters.

The Federal Government ：Section 1 of the Australian Constitution creates a democratic legislature, the bicameral Parliament of Australia which consists of the Queen and houses, the Senate and the Home of Representatives. Section 51 of the Constitution provides for the Commonwealth Government's legislative powers and allocates certain powers and responsibilities (known as "heads of power") to the federal government. Amount remaining responsibilities are retained by the States (before separate colonies). Further, each National has its own constitution, so that Australia has sovereign Parliaments, none of which can encroach on the functions of any other. The High Court of Australia arbitrates on any disputes which arise between the Commonwealth and the States, or part the States, concerning their respective functions.
The Commonwealth Parliament can propose changes to the Constitution. To become effective, the proposals must be put to a referendum of amount Australians of voting age, and must receive a "double majority": a majority of amount votes, and a majority of votes in a majority of States.
The Commonwealth Constitution as well provides that the States can agree to refer any of their powers to the Commonwealth. This may be achieved by way of an amendment to the Constitution via referendum (a vote on whether the proposed transfer of power from the States to the Commonwealth, or vice versa, should be implemented). Additional commonly powers may be transferred by passing other acts of legislation which authorise the transfer and such acts require the legislative agreement of amount the national governments involved. This "transfer" legislation may have a "sunset clause", a legislative provision that nullifies the transfer of power after a specified period, at which point the original division of power is restored.

In addition, Australia has several territories, three of which are self-governing: the Australian Capital Territory (ACT), the Northern Territory (NT) and Norfolk Island. The legislatures of these territories exercise powers delegated to them by the Commonwealth, and the Commonwealth Parliament retains the power to override territorial legislation and to transfer powers to or from the territories. While Australian citizens living in the Australian Capital Territory and the Northern Territory are represented in the Commonwealth Parliament, Norfolk Islanders are not represented federally.
Australia's other territories that are regularly inhabited (Jervis Bay, Christmas Island and the Cocos (Keeling) Islands) are not self-governing. Instead, these territories are largely governed by federal law, with Christmas Island and the Cocos Islands as well having local governments. The largely uninhabited Coral Sea Islands was established as a Territory of the Commonwealth in 1969 while Ashmore and Cartier Islands has been a territory since 1933 and administered under the laws of the Northern Territory.
The federal nature of the Commonwealth and the structure of the Parliament of Australia were the subject of protracted negotiations part the colonies during the drafting of the Constitution. The Home of Representatives is elected on a basis which reflects the differing populations of the States. Thus New South Wales has 50 members while Tasmania has. But the Senate is elected on a basis of equality part the States: amount States elect 12 Senators, regardless of people. This was intended to allow the Senators of the smaller States to form a majority and amend or even reject bills originating in the Home of Representatives. The ACT and the NT as well elect senators each.
The third level of government after Commonwealth and State/Territory is Local government, in the form of shire, town or city. These bodies such as Councils are composed of elected representatives (known as either councilor or alderman depending on the National), usually serving on a part-time basis.