A northern New South Wales council has been fined $300,000 for destroying a scar tree sacred to the local Gumbaynggirr people.

The fine was issued to Clarence Valley Council on Friday by the New South Wales Land and Environment Court for the offence of harming an object that it knew was an Aboriginal object.

The ruling marks the end of a saga which began in 2013, when the council lopped the top of the culturally-modified tree, exacerbating a decline in the tree's health.

Until then, the tree had stood for hundreds of years on what is now the intersection of Breimba and Dovedale streets in suburban Grafton.

Thought to be either a red bean or black bean tree, it had scarring on two parts. A scar measuring 1.4 metres tall faced a south westerly direction, while a smaller scar faced a westerly direction and was higher up the trunk.

The scar tree was registered as a culturally-modified tree on the Aboriginal Site Register in 1995, making it an offence to harm or desecrate the object.

Despite the tree's protected status, it ended up on a council list for tree removal, and on May 19, 2016, was completely removed.

The next day, after the council realised what had happened, it self-reported to the Office of Environment and Heritage.

Scar tree has deep roots in Aboriginal culture

Aboriginal Elders said the scar tree was culturally significant to the Gumbaynggirr people, with various reasons passed down by the knowledge holders to local Aboriginal people.

Roger Duroux, an elder of the Gumbaynggirr and Bundjalung tribes, said a male Elder told him three decades ago that "the scarring was made by our people … using a stone axe".

"I was told by the Elder that the tree was special and that it was possibly a "light tree" or floating tree which means that the bark could have been used to float on water for a specific purpose," he said.

"I was told that the cuts could also have been made by someone wanting to make a shield."

Aboriginal elders say the scarring was made using a stone axe either as a directional marker directing visitors to nearby Fisher Park, or for ceremonial purposes. ( Supplied: Alexandra Simpson, Office of Environment and Heritage. )

Brett Tibbett, a local Gumbaynggirr man, said he was told in 2005 or 2006 by an Elder and then chairperson of the Grafton Ngerrie Local Aboriginal Land Council, David Daley, that the tree was a marker for the Aboriginal population in the area.

"This means the tree was used as a directional tree for visitors directing them to an area now known as Fisher Park," he said.

"Fisher Park was traditionally a location where the Aboriginal population could get fresh water from a billabong and was also a meeting place and trading area.

"This scarred tree was significant in that it was used and is linked to other areas of cultural significance."

Heartbreak after tree's removal

When Mr Duroux drove past the stump that was once a culturally significant and protected scar tree, he was heartbroken.

"I could not believe what the workmen had done," he said.

"I slowed down to a stop in my car to look at it and someone beeped their horn at me. It didn't matter. I felt immediate loss and sadness.

"I said 'there goes another bit of our history and culture that has just been taken away and for no reason — it's gone forever'."

Mr Tibbett said he was upset and disappointed to hear what had happened to the tree.

"The tree was an important link to our community and culture," he said.

"There are not many places within the Grafton town boundary where you can go and visit a significant cultural object that pre-dates European settlement.

"The loss of this tree is irreplaceable and there was only one of its kind."

Lisa Southgate, who recorded the tree to protect it, said she was shocked and saddened to learn what had happened.

"Aboriginal objects such as this are extremely important to the Aboriginal community as they provide a link between the present and the past and people's ongoing links to the culture and landscape," she said.

Land and Environment Court finding

The Land and Environment Court heard the council was aware the tree was a protected Aboriginal object after it received a penalty notice in 2013 for lopping parts of the tree.

The council's director of Works and Civil Troy Anderson said he believed the offence was committed "as a consequence of a failure by the council to properly implement approved procedures" and "the failure by staff members to follow existing directions concerning the removal of trees".

In handing down its sentence, the Land and Environment Court acknowledged the council's "genuine remorse" and its acceptance of responsibility at the earliest stage.

Justice Brian John Preston cited a motion and letter of apology, in which the council "unreservedly" apologised and expressed its "extreme remorse".

The council was fined $300,000, which would be given to the Grafton Ngerrie Local Aboriginal Land Council.

The money will fund research into local Aboriginal cultural heritage to celebrate Aboriginal culture and promote reconciliation, and a feasibility study into a keeping place for Aboriginal cultural heritage items in the Grafton area.