A penalty point system, also known as a demerit point system, is a method used by licensing authorities to monitor and regulate driver behavior. Under such systems, an individual's driver's license accumulates demerit points for traffic offenses (or other infringements committed whilst driving) which last for a set period. The structure and administration of these systems vary between jurisdictions and the authorities enforcing them.

In most cases, the accumulation of points can lead to fines, disqualification, suspension, re-evaluation or revocation of a driver's license. Points are typically recorded by the relevant driver licensing authority, police force, or other authorizing body and may be added or removed in line with jurisdiction-specific rules.

In jurisdictions that use a point system, the police or licensing authorities maintain records of the demerit points issued to each driver. Traffic offenses, such as speeding or disobeying traffic signals, are assigned a designated amount of points. When a driver is found guilty of an offense, the corresponding points are added to their driving record. When a driver's total point number exceeds the prescribed threshold, they may face additional penalties, be required to attend safety or driver-training courses, undergo re-examination, or have their license suspended or revoked.

In some jurisdictions, a subtracting point system is utilized, when drivers begin with a set number of points that are deducted following traffic offenses. The threshold for penalties may vary according to factors such as the driver's experience level, previous record, age, or other circumstances. Generally, it is common for younger or less experienced motorists to be subject to lower thresholds.

In certain systems, points may also be applied if a driver is deemed substantially at fault in a traffic collision. Demerit points can typically be removed through the passage of time without further offenses, or through the successful completion of approved driver-training or traffic-safety courses.

Major traffic offenses, such as hit-and-run or drunk driving, are often handled outside of the point system. Such offenses often carry a mandatory suspension of driving privileges and may incur penalties including imprisonment.

Traffic laws are the responsibility of the Australian state and territory governments. Demerit points schemes have been adopted by all states and territories, and road authorities share information about interstate offenses.

In all states, drivers holding a full, unrestricted license will be disqualified from driving after accumulating 12 demerit points or more within a three-year period, except in New South Wales, where drivers are allowed 13 points in a three-year period. Those who can prove they are professional drivers are allowed an additional point. The license suspension period is three months, plus one further month for every extra four points beyond the threshold, with a cap in most states of five months (for 8 points or more over the threshold; e.g. 20 points or more on a full license). As an alternative to accepting immediate suspension, a driver can apply for a "good behavior" period of 12 months. In most states, drivers under a good behavior period who accumulate one or two further points (except in Victoria, which does not allow any further offenses) have their license suspended for double the original period. Most states also provide for immediate suspension of a license, instead of or in addition to demerit points, in certain extreme circumstances. These include offenses for driving under the influence (DUI) of alcohol or other drugs, or for greatly excessive speed.