To address concern regarding water sustainability, the Australian Federal Government and many state governments have implemented regulatory mechanisms and incentives to support households to purchase and install rainwater harvesting systems. This has led to an increase in rainwater harvesting in regional and urban Australia. This review examines the implementation of the regulatory mechanisms across Australia. In addition, the literature investigating the potential health consequences of rainwater consumption in Australia was explored. Studies demonstrated that although trace metals such as arsenic, cadmium, chromium, lead, and iron were present in Australian rainwater, these metallic elements were generally found below the health limit guideline, except in high industrial areas. In addition, pathogenic or indicator microorganisms that include, but are not limited to, Escherichia coli, total and faecal coliforms, Campylobacter, Salmonella, Legionella, Pseudomonas, Cryptosporidium, Enterococci, Giardia, Aeromonas, and Mycobacterium avium Complex (MAC) have been detected in rainwater collected in Australia. However, epidemiological evidence suggests that drinking rainwater does not increase the risk of gastrointestinal disease. It was also identified that there is a need for further research investigating the potential for rainwater to be a source of infection for opportunistic pathogens.