Thousands of Australians defied coronavirus rules on Tuesday to protest the country's national day, held on the anniversary of British colonisation of the vast continent that its Indigenous population brands "Invasion Day".

Officially recognised as Australia Day, January 26 also sees annual rallies drawing attention to the injustices faced by Indigenous people and calling on the government to change the date of the national holiday.

The celebration of the origins of the modern nation is a time of mourning for Indigenous Australians, who have inhabited the land for 65,000 years and view the arrival of British settlers in 1788 as the beginning of two centuries of pain and suffering.

Thousands of people gathered at a central Sydney park in defiance of police threats of fines and arrests for breaching a 500-person limit on gathering in public places, though organisers called off a march through the city that usually follows.

Police said five people were arrested, including one who was charged with assaulting a police officer.

Authorities earlier refused to waive the cap on numbers, despite no new cases being detected in Australia's biggest city for more than a week.

Chants of "Sovereignty was never ceded" and "No justice, no peace" rang out while others held up placards with slogans including "Not a Date to Celebrate" and "Black Lives Matter".

"For us it represents cultural genocide. Our families being ripped apart. Years and years of disease and famine. And the intergenerational impacts of that are still being felt today," Gomeroi man Dylan Booth told AFP.

Thousands more attended protests in major cities across the country, with rally organisers encouraging attendees to wear face masks and maintain physical distance where possible.

The date of Australia Day -- which was only formally established as a national holiday in 1994 -- has attracted increasingly heated debate in recent years.

The occasion is staunchly defended by right-wing commentators and retains strong support from the country's conservative government.

Prime Minister Scott Morrison, who earlier in the week chided Cricket Australia for dropping the name from promotions for its January 26 matches, said history "changed forever" in 1788 and there was "no escaping or cancelling this fact".

"For better and worse, it was the moment where the journey to our modern Australia began," he told an official ceremony in Canberra.

"And it is this continuing Australian journey that we recognise today."

al-hr/oho