We identify key lessons learned from the international experience of pay-for-performance and use them to formulate questions for Australia to consider before such a scheme is introduced. Discussion of lessons learned is based on a narrative review of the literature. We examined international evidence on factors to consider when designing pay-for-performance schemes, and the impact of these schemes on primary care practitioner behaviour and on primary care funding. Pay-for-performance schemes evolve over time, and usually involve several complex interventions including accreditation, education, quality improvement programs, investment in information technology and data collection systems, professional support and regional structures. These are all necessary conditions for linking financial incentives to quality of care. There is a strong argument for changing the existing service incentive payments program and investing the resources into revised outcome payments that provide rewards for annual improvements in numbers of patients receiving completed cycles of care. If pay-for-performance is to be introduced in Australia, several key lessons should be learned from the experiences of other countries. Pay-for-performance should be used as part of a wider strategy for quality improvement; it should not be seen as a panacea. Pay-for-performance should be used to drive quality improvement, not simply to reward those who are already providing high-quality care.