There are two streams in Australian Gymnastics. They are the international stream and the national stream (i'll explain what state stream is in a sec). International stream is preparing gymnasts for international level competitions like the commonwealth and Olympic games. Most gymnasts doing international stream start in the level 1-3A routines. Training is many many hours (usually 25-40 per week in levels 5-10) and it is done at specialist gyms. You must do this stream to be considered for the Australian team. But you DD is already probably too old at 8 to start this one.
The next stream is national stream. Most of these kids come from levels 1-3B. This stream train a lot of hours. (12-25 a week in levels 4-10). And do the harder routines, not as hard as international but harder than a state system. In this stream you can go to nationals from level 7.
State stream is not a part of gymnastics Australia it is a part of your state association so its different in every state. Some states dont have state stream and others do. The ones that do make up their own routines to be an easier version of the national routines. These kids train less hours (usually less than 10 a week). And can only compete to a state level. usually their athletes come from levels 1-3C.
Some states even have a 4th stream, although not many. In WA its called the club stream, and I think Vic also has one called gymstar. This is an even easier stream designed for training just 1 or 2 days a week.
Its not that unusual in Australia to go straight from level 2-4 because levels 1-3 are not compulsory. many gymnasts skip all three of them altogether and just start in level 4. If she is ready there is no need to spend a whole year in level 3 just to pass time. Also sometimes it is done if there aren't enough kids for a level 3 team.
There are several reasons why a child might be chosen for state stream and not national.
1. Commitment. the national stream means a lot of hours the gym may not be sure if you want to commit that many hours or if your DD is ready to handle it. If the hours are a big jump from 2-4 they may have chosen state to work her up to the bigger hours.
2. Ability, yes they may look at her and decide she doesn't have the ability for national stream. But this doesn't mean she never will. Some kids start out in state stream and move up as their skills progress.
3. Space in the squad, gyms have to be run practically. If the national squad is full and not the state squad they'll put her there.
4. Skills, she may not yet have some of the skills required for national while she does for state.
5. Age, some teams will choose athletes based on age. So they are a similar age to the others in her group. 8 is still quite young for level 4. Sometimes the national team girls are a bit older and they may feel she'd fit in better with the younger ones. Most national level 4's train 14-16 hours a week, they may feel its too much for an 8 yr old.
6. Body, gyms often choose gymnasts based on their body. It seems unfair but it does happen. They want kids who look a certain way. Small, trim, muscular, strong looking.
7. Strength and flexibility are often a requirement when choosing teams. If she hasnt got enough strength yet she might not keep up with the national team girls.