Sydney Water says an substance found trickling down cliffs and into the sand at Bombo Beach was mud.
It is understood tests to determine the nature and origin of the spill have been ongoing since June.
In response to a request for an update from the Kiama Independent, a Sydney Water spokesperson said the following:
"On 24 June, Sydney Water responded to a reported wastewater overflow in Gipps St. This was unrelated to a nearby incident on 13 June that was identified as mud on Bombo Beach.
"Sydney Water identified, cleared and repaired a cracked wastewater main in the days following, on a cliff near Gipps St.
"Signs were erected as a precaution. Follow-up sampling and bacterial results returned a negative reading for wastewater.
"Sydney Water takes its responsibility to protect public health and the environment seriously."