Background: When used for a therapeutic purpose such as for psychiatric illness, psychotropic drugs may enhance quality of life; however, when used to treat behaviours associated with dementia, they may have only a modest effect but lead to negative outcomes. Objective: We undertook an analysis of community-dwelling people with dementia or cognitive impairment to ascertain how prolific psychotropic medicine use is within the Australian community setting, which psychotropic medicines are being prescribed and to whom, and whether the use of such medicines is in accordance with therapeutic guidelines. Methods: We undertook a retrospective review of medication records, including medication charts, for 412 people with cognitive impairment, discharged from a home nursing service in Victoria, Australia, during the 6-month period between 1 January and 30 June 2013. Results: Cholinesterase inhibitor use exceeded the number of individuals with a recorded diagnosis of Alzheimer’s disease; in some cases, the dosage exceeded recommendations. Antidepressants were used by more than double the number of people documented with a history of depression. Antipsychotic medicines were prescribed for undocumented purposes, in some cases above maximum response levels, and multiple benzodiazepines were prescribed. Conclusions: Psychotropic medicine use was common in our study population, and use of these medicines was often not in line with therapeutic guidelines. Further research is required to ascertain reasons for the high use of psychotropic medicines in this group, and greater consideration is required by health professionals of the appropriate use and regular review of psychotropic medicines. Improved documentation of diagnoses and the indications for prescribing psychotropic medicines is needed, as is greater implementation of educational programmes to support care workers and carers.