There was a discussion about this very scenario in the auda/ausregistry .au 
launch tour. I don't remember a definite take, but (letting the legal 
details aside) there was mention of an obvious secondary issue:

Similar to au.com and other subdomains of this type, except the chances of 
this happening in the .au space are much grater: I invest in my 
microsoft.web.id.au identity only to potentially find out that the parent 
domain gets cancelled (removed by authority, de-registered, expires, owner 
goes broke, etc) I have lost my identity with no right to appeal. Not to 
mention that after my shiny new domain goes on business cards and 
billboards, there is little I can do about price increases for the 
subdomain renewal.

My advice for any commercial organisation is to register domains in 
regulated top level spaces.

Kind regards,

Lucian Kafka
www.conexim.com.au

At 12:28 PM 14/06/2003 +1000, you wrote:
>My initial reaction was he shouldn't be able to... Especially with the
>id.au 2ld.
>
>But he isn't actually selling domains is he?
>
>If I wanted to sell joe.skeeve.net.au subdomain? Would that be illegal?
>
>Its not actually under the regulatory control of auDA is it?
>
>If I wanted go-f§ck-yourself.skeeve.net.au can auDA ban that under the
>obscene policy?
>
>If is indeed interesting issue.... But my gut says he isn't doing
>anything wrong.
>
>...Skeeve
>
>-----Original Message-----
>From: Josh Rowe [mailto:josh§email.nu]
>Sent: Saturday, 14 June 2003 10:44 AM
>To: dns§lists.auda.org.au
>Subject: [DNS] web.id.au
>
>
>Here's an interesting one, Graham Webber has registered "web.id.au" and
>is now selling web.id.au sub-domains.
>
>His web site suggests flowers.web.id.au, computers.web.id.au,
>sydney.web.id.au, design.web.id.au,e, dvds.web.id.au, etc.
>
>Does this break any rules?
>
>Web Id Australia
>http://www.web.id.au/
>
>"Get Your Web Id Today
>The easiest and most affordable domain & mail product on the web. Simply
>search for your preferred domain in the box above and click the Search /
>Register button. Assuming your domain is available, it will be setup
>within minutes.
>
>All Prices $AU & Incl GST.
>- Affordable Alternative
>- Instant Setup, No Waiting
>- No Restrictions on Domain Applications
>- Simple Management Area Available 24 Hrs 7 Days
>- 24 Hr Email Support
>- FREE URL Forwarding
>- FREE Mail Forwarding
>- Domain Prices From $19.95"
>
>The domain is registered by:
>
>Domain ROID:             D0372576-AR
>Domain Name:             web.id.au
>Last Modified:           17-May-2003 00:47:27 UTC
>Registrar ID:            R00013-AR
>Registrar Name:               Enetica
>Status:                  ok
>
>Registrant:              Graham Webber
>Registrant ID:
>
>Registrant ROID:         C1040255-AR
>Registrant Contact Name: Graham Webber
>Registrant Email:        gweb§web.id.au
>
>Tech ID:                 C1040256-AR
>Tech Name:               Graham Webber
>Tech Email:              graham§webcity.com.au
>
>Name Server:             ns1.enetica.com.au
>Name Server IP:          203.17.36.111
>Name Server:             ns2.enetica.com.au
>Name Server IP:          203.17.36.4
>
>
>Josh
>--
>http://josh.id.au/
>
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