At least five arrests were made in Sydney at a rally attended by around 2,000 people, despite rules limiting the numbers allowed to gather at 500.
The day is controversial as it marks the start of Australia's colonisation.
Australia Day is celebrated on 26 January, the anniversary of Britain's First Fleet arriving in Sydney in 1788.
Branded by its critics as "Invasion Day", it attracts annual protest rallies drawing attention to the injustices faced by Indigenous people.
For years, a "change the date" campaign led by Indigenous Australians has lobbied to move the national day.
The official events marking the day contain a lot of acknowledgements of the country's Indigenous past and traditions.
This year, the day began with a ceremony in Sydney that included traditional Indigenous dances and a smoking ceremony.
Covid concerns though led to some official events being cancelled.
During the Sydney protest, demonstrators shouted "sovereignty was never ceded" and "no justice, no peace", and held placards and banners reading "Not a Date to Celebrate" and "Black Lives Matter".
Authorities had refused to waive the cap on numbers for the protests this year, despite no new infections being recorded in the city for more than a week.
Thousands more attended rallies in other cities across the country, with organisers asking protesters to maintain physical distance where possible and wear masks.