Australia and New Zealand are currently reviewing the regulations governing nutrition function, health and related claims on foods. Health claims currently are not permitted on food labels, with one exception. The aim of this study was to describe the use of such claims on packaged food for sale in Australia (excluding nutrient content claims) prior to any changes to the regulations, and measure compliance with existing regulations. A survey was conducted of the labelling of 7850 products (including multiple pack sizes of individual foods) in 47 different food categories on sale in New South Wales in 2003. A total of 2098 nutrition function, health or related claims and 12 therapeutic claims were recorded. Fourteen percent of products carried some sort of claim. If nutrient function and general health maintenance claims are excluded, 8.1% of products carried a health or related claim. Using the claims categorisation proposed by Food Standards Australia New Zealand for a new standard on claims, general-level claims were found on 9.8% of products and high-level and therapeutic claims (illegal at the time) on 1.2%. The food categories with the highest proportion of products carrying claims were sports drinks (92%), energy drinks (84%), sports bars (57%) and breakfast cereals (54%). 118 high-level and therapeutic claims did not conform to current food standards and there were many general-level claims for ingredient benefits that were unlikely to be able to be scientifically substantiated. The results of this survey suggest that more than 5% of claims were not complying with the current regulations and that the standards were not being fully enforced. To be effective, the new standard will need to be accompanied by clear guidelines for manufacturers on requirements for substantiating claims. Comprehensive education and enforcement frameworks also will be needed, to reduce the number of illegal or apparently unsubstantiated claims.