Edited from http://www.army.gov.au/Our-history/Traditions/Colours-Standards-Guidons-and-Banners

The term ‘Colours’ broadly encompasses the four distinctive forms of Honourable Insignia that are the symbol of the spirit of a regiment, for on them are borne the battle honours and badges granted to the unit in commemoration of gallant deeds performed by members of the unit from the time their unit was raised.

Originally the Colour was the rally point, when during the noise and confusion of battle, it was the focal point of the regiment, even if the commander was killed, hope was always present whilst the Colours remained intact. On the verge of ultimate defeat the troops would concentrate around the Colours, which would become the scene of its last defence. From such times, records of epic gallantry and acts of heroic self-sacrifice have been associated with the Colours whose safety engendered these acts.

The full history of a regiment is contained within written records, but as these are not portable in a convenient form, the Colours, emblazoned with distinctions for long and honourable service, are something in the nature of a silken history, the sight of which creates a feeling of pride in soldiers and ex-soldiers alike. The purpose of the Colours was to allow the regiment’s colours to dress off the centre of the regiment and to provide a rallying point if withdrawing or disordered during an attack.

Those regiments whose duty it was to skirmish ahead of the main body, where speed and concealment were essential to the execution of this duty, did not carry colours. These were termed Rifle Regiments, which is the reason why they do not carry colours, they do however emblazon their Colours / Battle Honours on their Regimental Drums.

This tradition has been adopted by the Australian equivalent of those regiments, for instance Commandos and the Special Air Service Regiment who likewise do not carry colours.

Australian Army Royal Regiments
Infantry Colours are made of silk with Royal Blue being reserved for units who have been granted the title 'Royal', whilst a dark green is used by non-royal regiments. Prior to 1960, only one battalion had the prefix Royal that being the 6th Infantry Battalion, The Royal Melbourne Regiment. Now, that all reserve battalions are part of Royal Regiments they are entitled to carry blue regimental colours. University regiments continue to carry colours of dark green silk.

Prior to 1960 the Royal Australian Regiment was the only multi battalion regiment in the Army. In that year a complete reorganisation of the Citizen Military Force’s, thirty one infantry battalions combined into six regiments comprising twenty battalions was achieved. Each new regiment was granted the title Royal and was based entirely upon the State in which it was located.

Since that time the reserve battalions of the various states have undergone many reductions in size in line with government policy. Many of these reductions have resulted in the battalions being linked to preserve traditional links with the original units of the 1st Australian Imperial Force.

Queen’s and Regimental Colours
Two Colours, the Queen’s and Regimental, are carried by all Australian Infantry Regiments, including battalions of the Reserve and by certain training establishments such as the Corps of Staff Cadets and University Regiments.

To date it has not been possible to trace any authority granting Colours to AIF units but a number of units did possess them [more to come]

ref: Fighting Ninth Magazine 1954 p 7 article by Dan Suller

One of the first sets of Colours presented to an Australian Infantry Battalion were those presented to the First Regiment of Queenslanders at New Farm Racecourse 1n 1882 by Miss Kennedy, daughtier of Governor Kennedy.

These first Colours were laid away in St John's Cathedral on 19 November 1935.

laid up 1953

ref: Fighting Ninth Magazine 1954 p 6 article by Dan Suller

laid up 23 March 1969

The Battalion was presented with new Colours in December 2015 coinciding with the 100th Anniversary of the Landing at Galipolli where the 9th Battalion is credited with being the First Ashore.

Laying up of Colours

After service Colours are laid up in sacred or public buildings in order to maintain an atmosphere of veneration. Colours are not disposed of or destroyed when their appearance has deteriorated beyond recognition, they are meant to be left to turn to dust as do the bodies of the fallen soldiers who served them.
The fact that colours have, from the early ages, been consecrated would give them an aspect of sacredness, which could not be wholly ignored when consideration was given to their disposal. In view of the reverence paid them whilst they are in service it is not surprising that care has been taken to ensure that they ultimately repose in sacred edifices or other public, buildings where their preservation is ensured with due regard to their symbolic significance and historic association.

In the past the custom was for Guidons or Colours to be laid up in a place selected by the Commanding Officer in the case of an existing unit, or by the last Commanding Officer or Unit Association in the case of a unit not now on the 'Order of Battle'. In 2011 this was changed so that Chief of Army has final approval on the requested location. The following are places that Colours have been laid up in the past:

• The Australian War Memorial in Canberra,
• A state war memorial,
• A cathedral, church or military chapel,
• A military corps, regimental or unit museum,
• A military corps school,
• Unit or Brigade Headquarters,or
• A civic building.

It was formerly the practice that 'laid up' colours could not be removed from their resting-place and taken back into service. This however has now been modified and the laid up colours of disbanded or amalgamated units may be retaken into service, by those units should they be brought back onto the Order of Battle, provided the colours are deemed serviceable.

Reference:
http://www.army.gov.au/Our-history/Traditions/Colours-Standards-Guidons-and-Banners