Either @stilgherrian has been transported to America, or I really am the only person who spells gaol correctly here (along with @jbugs14)
“Correctly”, eh? Hilarious, Neil.
Dictionaries record language as it is actually used, not as those with a dangerous little knowledge imagine it is used. Both the Macquarie Dictionary and the Oxford English Dictionary list “jail” as the primary spelling. And as Google’s Ngram shows, “jail” started to be used more often than “gaol” some time in the 1830s, at least in the totality of English.
The OED does record “gaol” as a second spelling in the entry’s head, but the Macquarie does not. Instead, it adds this note:
Usage: In general the spelling of this word has shifted in Australian English from gaol to jail. However, gaol remains fossilised in the names of jails, as Parramatta Gaol, and in some government usage.
Fossilised. See that?
According to the Oxford English Dictionary, consulted online just now:
In British official use the forms with G are still current; in literary and journalistic use both the G and the J forms are now admitted as correct; in the U.S. the J forms are standard.
Looking through the OED’s citations, we see “Iaiole” dated to ca1300, “Iayle” to ca1440, “Iaile” to ca1660 and some bloke called Shakespeare, “jayl” to 1743–5 and good ol’ “jail” to 1860. Of course that last citation is R W Emerson, an American, so presumably Neil thinks that doesn’t count. But even if we imagine Australian English is derived only from British English — something that’s patently untrue — we still have precursors of the J form going back a mere 700 years.
I’ve nothing against people choosing to use different forms of language. Far from it. It adds colour, spice, variety. But that’s not the same as imagining that an older form is somehow “right” and newer forms “wrong”. Especially when your views are at odds with the vast majority of the language’s native speakers.
Just how far do you want to go back and freeze our language — or should I say “fossizlise” it — before it’s acceptable, Neil? A hint: When you’re “the only person” who thinks something is right, you’re probably not.
[Update 4.15pm: Google Ngram image added, with explanatory sentence. The graph showing all English usage is slightly misleading. Restricted to British English only, the "jail" form has been the more popular "only" since the 1940s. I'll post a further update in due course.]