The identification of Indigenous people for statistical collections is based largely on self-identification.
The 'definition' used by the Commonwealth is:
"An Aboriginal or Torres Strait Islander is a person of Aboriginal or Torres Strait Islander descent who identifies as an Aboriginal or Torres Strait Islander and is accepted as such by the community in which he or she is associated." 
It is not always practical to collect information on ‘community acceptance' in general purpose statistical and administrative collections, so standard questions on Indigenous status relate to descent and self-identification only .
In an attempt to obtain consistent information the Australian Bureau of Statistics has endorsed the following question:
Are you of Aboriginal or Torres Strait Islander origin?
(For persons of both Aboriginal and Torres Strait Islander origin, mark both 'Yes' boxes.)
( ) No
( ) Yes, Aboriginal
( ) Yes, Torres Strait Islander
The exact form of the question differs for different situations . For example, if the question is answered on someone's behalf (such as a parent for a child), the question is 'Is the person of Aboriginal or Torres Strait Islander origin?').