SYDNEY residents will be encouraged to deliver their household food scraps to communal composting sites under a $465 million shake-up of the state's recycling and garbage management by the state government.

There will also be drop-off sites for unwieldy waste that contaminates recyclable material, such as batteries, paint, smoke detectors and fluorescent tubes.

An audit of the state's household waste management has revealed almost three-quarters of rubbish found in NSW garbage bins should not be going to landfill.

Council audits commissioned by the government found 70 per cent of the contents of the average red bin was food, garden waste and recyclables, which should not be sent to landfill.

Food accounted for 40 per cent of bin contents. Ten per cent was garden waste and 20 per cent was recyclables. Only about 30 per cent was rubbish that should legitimately go to dumps.