Background Evidence indicates that improved hand hygiene compliance can lead to reductions in healthcare associated infection. However, there are few papers that clearly document the observation method used to collect the hand hygiene compliance data. This article describes the Hand Hygiene Australia 5 Moments for Hand Hygiene observation method in detail. Methods The Australian Commission for Safety and Quality in Health Care funded Hand Hygiene Australia (HHA) to implement the National Hand Hygiene Initiative (NHHI) to improve hand hygiene compliance (HHC) and establish a national validated system of HHC auditing. Based on the World Health Organisation (WHO) World Alliance for Patient Safety campaign 'Clean Care is Safer Care', HHA adapted the WHO hand hygiene compliance data collection form to suit Australian healthcare facilities. Results Hand Hygiene Australia developed a standardised approach to direct observation of HHC of healthcare workers by developing a uniform suite of tools and a data management system for accurate data collection and report generation. Conclusion Implementation of the HHA 5 Moments HHC audit method has facilitated standardised, reliable and meaningful collection of hand hygiene compliance data that is driving HHC improvement across many different healthcare settings around Australia.