To help achieve national consistency of assessment and reporting in the Australian Vocational Education and Training sector, there is a need to develop a set of national principles for graded performance assessment. This paper challenges a number of prevailing principles from both a theoretical and assessment perspective, namely that grades must be criterion referenced (Williams & Bateman 2003), meaningful (Rumsey 2003) and applied once competence has been achieved (Williams & Bateman 2003). This paper argues that the use of generic criteria cannot be defended in terms of their validity and reliability and that a clear understanding of the underlying developmental continuum of learning is required to inform the development of meaningful and valid criteria and descriptors of quality performance. Finally, the paper proposes a set of principles that have been grounded in theory, have been put to the test in large-scale research, and are consistent with international literature on competence assessment.