In a nut shell -
Kindy (or pre prep) must be 4 by 30th June
Prep, must be 5 by 1st July
Prep is not compulsary - however if you choose to forgo a year, they must start year one the following year unless you have a diagnosed reason for why you can delay start to school.

So you have older and younger children in the one group really, those with an early year birthday are less mature by quite alot compared to those who missed out the previous year and turn 6 in their year of prep.