In Sydney, Indigenous groups have called for protests to demand the national day be changed, although state health officials have refused to make an exemption to social distancing rules to allow for crowds of more than 500 people.
Television footage showed protesters gathering early on Tuesday in small groups to comply with the limits. Police have warned protesters could face fines and imprisonment for breaching public health orders designed to limit the spread of the novel coronavirus.
In Melbourne, rally organisers said protesters would be sorted into groups of 100 people with a 10-metre (30 foot) distance between each to comply with social distancing rules.
While thousands of people flocked to beaches and picnic spots around the country to celebrate the national day, many official events were cancelled due to coronavirus restrictions.
Prime Minister Scott Morrison said Australia Day represents how far the country has come since the First Fleet arrived.
“There is no escaping or cancelling this fact,” Morrison said at a ceremony in Canberra. “For better and worse, it was the moment where the journey to our modern nation began.”