It is thought that the unique Australian Army system of colour patches may have been inspired through the South African Boer War (1899-1902) where some British Army units wore small cloth patches in colours or tartans, appropriate to their regiments, on the puggarees of their pith helmets. In late 1914 an AIF Order provided small flags, nine inches square (23 cm), to be used to mark headquarters and unit lines. These different coloured flags, with some minor changes, were to become the basis of the 1st Division's colour patches.

A 1st Division Order issued in Egypt in March 1915 stated: 'In order to better distinguish the several units of the Division, coloured patches of cloth will be worn on the sleeve one inch below the shoulder seam. Except in cases of Headquarters of Brigades and the Divisional Artillery, the Engineers and Army Medical Corps, badges will consist of two colours, the lower indicating the formation, the upper the unit etc. Light Horse (4th Light Horse) and Artillery will be divided diagonally, the others horizontally'.

Later the same year a Divisional Standing Order amended the patch detail for the gunners to one patch for all Divisional artillery. Each brigade within the Division was allocated an identifying colour patch, and this system was then extended to other organisations within the Division. The patches within the Division were worn at the top of both sleeves of the uniform and, as other divisions of the AIF were formed, they too were allocated distinctive divisional shape patches. Overall about 300 colour patches were authorised for the Army in World War I.

At the outbreak of World War II, and with the raising of the 2nd AIF, it appears that many newly raised units may have initially been authorised to adopt the patches of their numerical forebears of the Great War but some units just went ahead and did so without authority. This resulted in a significant number of units, particularly the infantry battalions, wearing colour patches completely unrelated to those of their 1st AIF namesakes. This problem was corrected in late 1940 with the issue of an appropriate instruction. The colour patches of World War II were backed by a grey border and as the War continued new shapes came into being; for example, the T-shaped patches of units within the 9th Division in 1943 (which commemorated the major part played by the Division in the siege of Tobruk). By the end of 1944 some 800 colour patches had been introduced into the Army during the War. A small number of patches were also approved for units of the British Commonwealth Occupation Force for Japan in both 1945 and 1946. The Australian colour patch

system was discarded in 1949 in favour of the British Army style of shoulder titles.

The colour patch was re-introduced into the Army in 1987 and the British Army style shoulder title was phased out by the end of 1996. Units which could trace their lineage back to either World War I or World War II were granted permission to adopt the appropriate patch (some claims are, however, somewhat shaky). These patches came to be referred to as the 'Series I' colour patch system, as it was then decided to put patches on every unit and organisation within the Army. In 1996 the 'Series II' patches came into service; these were largely based on corps, and in some cases unit, colours. The colour patches are no longer worn on both shoulders, as was the case in the past, but are now positioned on the right-hand side of the puggaree on the 'Slouch' Hat. A number of the patches of both World Wars were worn on the shoulders as matched pairs; particularly those of the Royal Regiment of Australian Artillery and the Royal Australian Armoured Corps. The patches worn on both the left and the right shoulders looked the same from the front. The patches seen on colour patch charts, or on flags, banners, signs or on letter heads are the patches worn on the left shoulder and the 'leading edge' is facing to the left as seen by the observer. However, the patches that were worn on the right-hand side of the body were a 'mirror image' of that worn on the left. This means that any 'Series I' patch, that has a 'leading edge', is (correctly) worn on the hat 'back-to-front' to that seen on charts and signs etc (there is no 'leading edge' with the 'Series II' patches).