Background Implicit care rationing (ICR), where care delivery is strategically arranged by frontline healthcare professionals under resource constraints, is widely acknowledged across healthcare settings. However, its theoretical conceptualisation remains underdeveloped in the context of long-term aged care (LTAC) settings worldwide. Aim This study aimed to develop a theoretical framework of ICR in Australian LTAC by exploring the actual care decision-making processes of hands-on healthcare staff. Methods Using a Straussian grounded theory approach, data were collected in two phases. Phase 1 involved developing a preliminary framework through in-depth interviews with 26 registered nurses, clinical managers and personal care workers. Phase 2 validated and refined the framework through focus group discussions with another 18 healthcare staff in the above roles. Constant comparative analysis was conducted concurrently with data collection and supported by an iterative review of relevant literature. Results This framework conceptualises ICR as a dynamic, shift-level decision-making process concerned with the order and completeness of care delivery. This cognitive process is driven by the intuitive assessment of healthcare staff of both external and internal impact factors, guided by a risk-averse, consequence-focused mindset and trade-offs between person-centred and task-focused care approaches. Conclusions The developed theoretical framework enhances academic consistency and rigour through an evolutionary reconceptualization of ICR grounded in strategic healthcare resources allocation. It clarifies the relationship between ICR and missed care, challenging their interchangeable use in previous research. This framework also offers practical insights to inform workforce strategies, measurement development and targeted interventions, ultimately contributing to improved care quality and safety in Australian LTAC.