what state is it illegal to drive with interior lights on

Short answer: none of them.

No Australian state or territory has a blanket law against driving with the interior light on.

But if that glowing dome turns your windscreen into a mirror or distracts you, police can ping you under rules about clear view and proper control, and possibly undue glare at night.

So yes, it’s technically allowed—right up until it isn’t; use it briefly when stopped and check your state authority for the exact wording.