Animal colouration is one of the least understood components of phenotypic variation. Colours may be conspicuous – demanding the attention of rivals or mates – or they may be cryptic, allowing animals to remain undetected by predators or prey. The degree to which colours are conspicuous or cryptic is influenced by their contrast against a background. Variation in background colours and differences in habitat use could therefore promote the evolution of diverse animal colours. If colours are adapted to their backgrounds, cryptic colours should be less – and conspicuous colours more – contrasting if seen against commonly used, relative to unused, backgrounds. We tested these predictions in a community of Australian woodland birds by comparing the contrasts between plumage colours and the backgrounds of used and unused microhabitats for foraging, nesting and display. Although, in general, patterns of plumage-background contrast followed our expectations for cryptic and conspicuous colours, the average differences in contrast were small and rarely statistically significant. We conclude that while selection for optimal background contrast may explain colour variation in some species, it has limited potential to comprehensively explain colour diversity at the community level.