Legal action over salmon farming in Macquarie Harbour has been motivated by a bitter dispute over profits and not the harbour's environmental health, a court has heard.

Tasmania's three big salmon companies have been battling in the Federal Court this week, after Huon lodged legal proceedings about fish stock levels in the harbour.

The company is challenging the 2012 decision of the then-federal environment minister to allow salmon farming expansion in the harbour, arguing it's invalid and has led to environmental degradation.

Rival companies Petuna and Tassal are parties to the case, and support the Minister's decision.

On Tuesday Huon executive director Frances Bender took to the witness stand and was grilled by Tassal's barrister Shaun McElwaine.

Mr McElwaine argued that since 2012, Huon had consistently complained about the allotment of stock in the harbour, and felt it had been discriminated against, with Tassal benefiting financially.

Ms Bender said she accepted that, but said she had also long raised concerns about the stock levels being too high, and the negative affects on the harbour's oxygen levels.

Mr McElwaine said the legal action had been initiated under the guise of environmental concerns, but was motivated by profits.

"I put it to you that the primary reason you commenced these legal proceedings is because of commercial disadvantage," he said.

Mr McElwaine said Ms Bender's end game was for the decision to be overturned, and the stock levels to be re-visited.

"This is a fight between you and Tassal and Petuna," he said.

Ms Bender said the proposition was offensive.

"No, it's for the purposes of saving the environment before it blows up," Ms Bender said.

"The conditions put in place to protect the environment have failed miserably."

Report finds oxygen levels still low

The exchange came as an updated report on the harbour's health was released by the Institute of Marine and Antarctic Studies, which found oxygen levels in the harbour were still very low, resulting in a reduction in the fauna that live on the seabed.

But it suggested there was "still clearly potential for recovery in the system".

Tassal tested a tarp to collect fish waste in March. ( Supplied: Tassal )

"Whilst the latest survey indicates that the rate of recovery observed in the last survey has not been sustained, it does still suggest that there is capacity for recovery," the report said.

Huon launched the legal proceedings in early 2017, and it followed the release of a damning IMAS report on the harbour's health.

The report found salmon farming had created "dead zones" in the harbour, including damage to the World Heritage Area.

The Environment Protection Authority has reduced the fish cap to 12,000 tonnes to allow the harbour to recover, but Tassal has been permitted to go over that level by 4,000 tonnes if it captures the salmon's waste.

There's currently about 7,000 tonnes of salmon in Macquarie Harbour, down from 13,500 in December after the companies conducted harvesting.

Some of the reduction is due to fish deaths resulting from a virus and a storm.