Language changes over time, and current usage needs to reflect that to be accurate. There was a time when "gaol" was the accepted spelling in Australia. But that time was 1954, not 2014. Jail is the correct spelling these days.
Picture from Trove
The Macquarie Dictionary maps out this shift neatly:
In general, the spelling of this word has shifted in Australian English from gaol to jail. However, gaol remains fossilised in the names of jails, as Parramatta Gaol, and in some government usage.
From a pronunciation and spelling point of view, the shift is helpful: no other common English words begin with ga- but pronounce the initial sound as a "j". English spelling is frequently inconsistent, but it is helpful when it does attain consistency.
As the entry points out, the exception is if the name of a specific jail uses the older spelling. It's Old Dubbo Gaol, not Old Dubbo Jail. Accuracy matters.
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