A central feature of the constitutional changes imposed at the time of Federation in 1901 was the ‘fiscal union’ of the six States. This union involved the abolition of tariffs on trade between the States, the harmonisation of the tariff rates and of the excise duty rates of the former six colonies, and the establishment of the financial arrangements to distribute the surplus net customs and excise revenues among the States. This paper examines these four elements of the fiscal union. It provides, for the first time, a measure of the change in the level of tariff duties imposed on imports from outside the Commonwealth and in excise duties. The harmonisation of the customs duty rates increased the average rate of customs duty on dutiable imports from outside the Commonwealth by about 34 per cent, while the harmonisation of the excise duty rates maintained the rates at about the mid‐point of these rates in the colonies. The four elements of fiscal union interacted and together they laid the foundations of assistance policy, commodity taxation and Commonwealth–State financial relations for the future Commonwealth of Australia.