By the Colonial Defence Act of 1865 it became lawful for any Colony, subject to certain conditions, to provide and maintain its own vessels of war, and these were authorised to wear the Blue Ensign with the seal or badge of the Colony in the fly.
The earliest badge of the Colony of New South Wales was the Red Cross of St George on a silver field. This was authorised in an Order-in-Council of the British Government, dated 7th August, 1869. On 15th February, 1876, a new badge was proclaimed in the New South Wales Government Gazette. The notice read:
"His Excellency the Governor has been pleased, with the advice of the Executive Council, to direct that, for the future, the badge of the Colony to be emblazoned in the centre of the Union Jack used by the Governor when afloat, and to be inserted in the Blue Ensign by vessels in the employment of the Colonial Government, shall be as hereinafter described - Argent, on a cross gules a lion passant guardant or between four stars of eight points also or."