ABC Pool  

I almost missed this one, because it's been mentioned a few times in the Taskforce materials. But it definitely deserves a nomination.

Pool (http://www.pool.org.au) is the ABC's online collaborative media space. It's doing an excellent job of bringing Web 2.0 and interactive creativity to the national broadcaster, opening up opportunities for members of the public to interact with and contribute to ABC programming, and really breaking down the one-way street mentality that dominates traditional broadcasting.

In particular, Pool's GenePool project (http://www.pool.org.au/genepool) is worth mentioning. It's released 40+ items from the ABC vault (themed around evolution and Darwin) for reuse and remixing by the Australian public. It's one of the few examples of public broadcasters worldwide giving the material they create back to the public who paid for it. So Pool definitely deserves to be applauded.

Mosman Municipal Council 

I don't know if you're only looking for Federal examples, but one best practice example of Web 2.0 use at a local government level we noticed a few months ago is the Mosman Municipal Council.

You can see our full post about it here: http://creativecommons.org.au/node/255 and a case study here: http://wiki.creativecommons.org/Case_Studies/Mosman_Municipal_Council.

But in summary, they've published a community engagement strategy which makes mention of just about every Web 2.0 trick in the book: social networking, blogs, wikis, crowd-sourcing, Creative Commons licensing, even open formats and API. It discusses the importance of these measures in promoting transparency and accountability, and prioritises training Council staff and members to make use of these tools. The strategy has already started being implemented through various initiatives (particularly through the Mosman Library: http://www.mosman.nsw.gov.au/library).

And best of all, the strategy itself is under a Creative Commons licence, allowing other councils to make use of it themselves.

We weren't able to track down the author of the strategy, but they definitely deserve kudos.