Legislation to guide the care of the mentally ill is society's means of resolving the conflict between an individual's right to liberty and the need to ensure care for those whose illness renders them incapable of making rational choices and places them at risk of causing harm to themselves or others. The state also has a duty to provide care for people who have lost the capacity to recognise their need for treatment. Society continues to struggle with achieving the right balance in this conflict, and responses have swung from excessive use of powers of constraint and treatment on the one hand to an overzealous and insufficiently discriminating grant of individual freedom on the other. The former can result in denial of human rights to freedom while the latter can result in inadequate treatment and protection of severely mentally ill people.

In most states, the provision of resources and the organisation of services for the mentally ill have been progressively changed in response to the National Mental Health Strategy agreed by state and Commonwealth governments in 1992. This strategy emphasised minimisation of institutional care, the concept of the least restrictive modes of treatment and care, provision of multidisciplinary community-based care designed to assist people with a mental disorder to live, work and participate in the community, and the ‘mainstreaming’ of psychiatric care (placing psychiatric hospitals in general hospital environments).