Preferential Voting means that your ballot paper will have a list of the candidates  standing for the elected position. There is a single round of voting and you can then indicate your order of preference of those candidates. So, if there are five candidates then you vote one for your favoured candidate, two for your second favoured candidate, and so on down to five. You do not have to give a preference for all candidates. Your vote will not be invalid if fewer than the maximum number of preferences is used.. You can, if you wish, only mark your first preference or your first 2 preferences and so on, the choices is yours. Marking all preferences does not harm your first choice candidate.

Its useful to see how the counting works to better understand the process

Counting

With each round of the count the candidate with least votes is eliminated and the second preferences (or highest preference stll remaining) for that elinateded candidate are redistributed. The counting continues until one candidate has achieved more than 50 per cent of the votes cast in a particular round.

Working from the bottom up, if the total votes for a number of candidates do not equal the candidate above them then they are all eliminated.
In most rounds you will probably just eliminate the bottom candidate.

Where there is a tie, the candidate with the greater number of higher preferences will determine who stays in or wins the ballot. Should you still be unable to separate the candidates during the elimination process, then lots will have to be drawn to determine which candidate proceeds in the ballot and which is eliminated.

In the final ballot if both candidates are tied then the highest number of first preferences, followed by second preferences, and so on, will count.
In the unlikely event that you could not separate these final candidates, then the ballot would have to be re-run at a later date. Where the time constraints are such that a decision must be reached without a further ballot (for example, at a selection meeting for a parliamentary by-election where there is limited time between the selection meeting and close of nominations) then lots may be drawn to determine the result of the final round.
There is no casting vote for the chair in any circumstance, though the chair is entitled to participate in the ballot provided s/he is a member otherwise eligible to participate in the ballot.

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