The Australian Terrier descended from the rough-coated type terriers brought from Great Britain to Australia in the early 19th century. The ancestral types of all of these breeds were kept to eradicate mice and rats. The Australian Terrier shares ancestors with the Cairn Terrier, Shorthaired Skye Terrier, and the Dandie Dinmont Terrier; Yorkshire Terriers and Irish Terriers were also crossed into the dog during the breed's development.

The development of this breed began in Australia around 1820, and the dogs were at first called the 'Rough Coated Terrier. The breed was officially recognized in 1850 and later renamed the Australian Terrier in 1892. Rough-coated dogs have longer hair than the smooth-coated and have excess trace hair on the dog's head, face, legs, and body.

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