Abstract: Objective: To develop a transparent, needs-based mental health resource allocation framework to guide area level service planning in rural and remote settings. Methods: Using the Central Australian mental health service region as a case study, a five-step approach was used to analyse and gather relevant data as follows: (i) mapping a regional sociodemographic profile; (ii) estimating the expected level of mental illness within the regional population; (iii) estimating the expected level of specialist mental health service usage; (iv) estimating the expected categories of specialist mental health care required for the regional population; (v) making adjustments to the costs of providing specialist mental health care on the basis of demographic features of the region. These data were then matched with the availability, access and cost of specialist mental health care currently provided at the regional level. Results: The capacity of specialist mental health care in Central Australia was below the expected benchmark for the population residing in this region. The region required approximately double the existing funding allocation to provide an adequate and equitable level of care that meets the needs of the diverse population groups. Children and adolescents were the group most in need, as were adult Aboriginal people living in remote settings. Conclusion: The framework described provides the beginnings of more open and transparent evidence-based decision-making regarding mental health resource allocation and service development for rural and remote residents.