Drinking water quality remains a persistent challenge across regional and remote Australia. We reviewed public reporting by 177 utilities and conducted a national assessment of reported exceedances against the health-based and aesthetic guideline values of the Australian Drinking Water Guidelines (ADWG). Four definitions of a basic level of drinking water quality were tested to quantify service gaps across regional and remote areas of each subnational jurisdiction in 2018–2019. At least 25,245 people across 99 locations with populations <1000 reportedly accessed water services that did not comply with health-based guideline values. Including larger towns and water systems, the estimated service gap rises to at least 194,572 people across more than 115 locations. Considering health parameters and the ADWG definition of ‘good’ aesthetic characteristics, the reported service gap rises further to at least 627,736 people across 408 locations. Forty percent of all locations with recorded health exceedances were remote Indigenous communities. Monitoring and reporting gaps indicate that the actual incidence of non-compliance with the guideline values of the ADWG could be much higher than our estimates. Our results quantified the divergence in the assessment of water quality outcomes between Sustainable Development Goal Target 6.1 and the ADWG, demonstrated disparities between service levels in capital cities and the rest of Australia, and highlighted the need for place-based solutions. The methods and dataset provide a ‘proof-of-concept’ for an Australian national drinking water quality database to guide government investments in water services.