ouch, that's a big question, and really depends where you are in this great brown land.
should probably page Gregor B to the thread, he's the man for QLD
I guess th e short answer is, are you winning? if you win/lose about 50 % or at least have tight matches, then you are probably in the right division!
if the numbers swing further than about 75% either way, then you're probably not..
The long answer involves various states using different systems and is a bit of a pain, really.
In Hobart, for example, everything is ITN based, even down to individual ratings being split (ie, a player might be a 3.5 (NTRP 5.5, US observers) in Hobart even though there is technically no such rating)
But that's what I know, I have no idea how it's done in QLD..
5.0 all courter. Dunlop Bio 400T with cyclone @ 50, Prince CTS Precision 90
"Tennis isn't easy" - Corners