Sewage pollution from humans, animal and domestic sources (land and agricultural run-off) are recognized as a major cause of deteriorating water quality along Australia's coastline. Management of water quality has primarily relied on the use of bacterial indicator methods. However the validity and source-specificity of these methods have been met with increasing reservations for several years now. A relatively recent methodology uses a different chemical biomarker approach using 'sterols', a group of compounds related to the common bio-membrane lipid cholesterol and its derivatives. Sterols can offer an additional diagnostic tool to distinguish and discriminate between sources of faecal contamination in marine, freshwater and estuarine environments in both sediments and the water column. This study investigates for the first time, the degradation of coprostanol and selected faecal sterols in 'natural' sediments from a highly mixed (marine and estuarine) sub-tropical environment following a simulated pollution event (primary effluent); the use of faecal sterols as an additional indicator for determining non-point source sewage discharges at popular anchorages in the Moreton Bay and Gold Coast Broadwater system; and the use of sterol ratios in the determination of the fate and transportation of nutrients from a Sewage Treatment Plant (STP) point-source outlet pipe during plant malfunction. The microcosm degradation experiment revealed that faecal and selected sterols are continually synthesised and degraded over time by auto- and hetero trophic organisms within the sediment matrix. Coprostanol was the only sterol to degrade continually, with only minor fluctuations over a time period of two months. Results from this degradation experiment further revealed a sharp decline of coprostanol within the first week. From this it could be concluded that, without any further addition, external inputs of coprostanol are reduced to background levels within this time period. Therefore, removal of coprostanol after six days was 94% and 73% in mud and sand, respectively. The removal of coprostanol was much higher in mud than sand, reflecting a higher level of microbial activity in muddy sediments for assimilation of sterols. The field study undertaken at popular anchorages in Moreton Bay and the Gold Coast Broadwater revealed extremely low levels of sterols and bacterial indicators over both a spatial and temporal scale consistent with a shallow, oligotrophic, highly dynamic sand dominated system. Even though sterols analysed were found at extremely low levels (mostly in the nano-gram range), they were found to be highly correlated and were successful in identifying an unexpected once off pollution event from a point source at Moreton Bay Island. Other than this one incident, both sterol and bacterial levels were consistently low even when anchorages were at full capacity. Thus, sewage from recreational vessels was found to have very little, if any, effect on the water quality at anchorages in Moreton Bay and Gold Coast Broadwater. The point-source study conducted during a local sewage treatment plant malfunction revealed that even though absolute concentrations of sterols did not change during this event, the distribution of sterols within the samples changed, hence changing the sterol ratios. Further, nutrients (mainly nitrogen) can be transported several kilometres by currents, flocculate out of the water column and settle out into the sediment in areas with low tidal and hydrological flushing. There, the nutrients can cause in situ production of sterols in sediments changing sterol ratios. Overall, this study revealed that analyses of sterol biomarkers have the potential to indicate nutrient inputs (such as nitrogen) as well as sewage, post-hoc pollution events at extremely low levels/high dilutions in coastal sediments.