The climatology of the seasonal cycle of water mass variation and transformation in Bass Strait, south-eastern Australia, is studied using a high resolution three-dimensional sigma-coordinate hydrodynamic model coupled with data from observations and previous studies. Model forcing consists of the principal tidal constituents from the Australian National Tidal Centre and long-term monthly mean atmospheric forcing fields from NCEP reanalysis. The initial density field is established using temperature and salinity means and annual and semi-annual harmonics from the CARS2000 hydrographic atlas. This is also used to prescribe incoming water mass properties at model open-sea boundaries with seasonal variation. Far-field forcing is included with open-sea boundary parameterisation of residual sea-level representing both the South Australian Current and the East Australian Current. Lagrangian and Eulerian tracer methods are used to derive transport timescales, such as age, residence times and flushing times. These are used to examine and summarise model predictions and as a diagnostic tool in sensitivity studies. Currents, sea-level and water mass properties in the model compare favourably with previous studies and observations, despite limitations in the model and in the data used for comparison. The seasonal cycle, in model results, is characterised by formation of a shallow (< 20 m) saltier surface-layer in late spring to summer and subsequent downward mixing and erosion of the salinity field in autumn to winter with water mass from the west. This leaves behind water mass with positive age and salinity anomalies in areas of low flushing. In late winter-early spring most parts of this water mass leave the Strait interior. These areas are thought to be related to the source water of the Bass Strait Cascade. The residual circulation in all model experiments is shown to be related to seasonal-mean sea-level anomalies, arising from both barotropic and baroclinic adjustment, both in and surrounding the Strait.