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Dementia can affect memory, concentration, judgement, vision, and hand eye coordination, which makes driving more difficult. A diagnosis of dementia does not always mean that a person must give up driving straight away. However, because the condition involves a gradual decline in cognitive and physical ability, you will need to stop driving at some point.
All drivers are required by law to notify the local licensing authority (Roads and Maritime Services in NSW) of the diagnosis of dementia. Once notified, the licensing authority will ask that the driver’s doctor (usually GP) makes an initial assessment of the driver’s medical fitness. After this, a formal driving assessment by an occupational therapist may be required. Based on the results of these assessments the licensing authority will decide if the person can continue to drive. In NSW, a conditional (restricted) driving licence may be issued to people with dementia if the Roads and Maritime Services (RMS) is satisfied with the medical assessment of fitness to drive. Your doctor can advise you to stop driving but your state or territory driver licensing authority ultimately makes the decision.
You can find more information here: https://www.dementia.org.au/resources/dementia-and-driving-nsw