Community groups at Lake Cathie have voiced their concerns about the reddish nature of the water body.
A spokesperson from Port Macquarie-Hastings Council said the organisation is working with Department of Industry and Environment (DPIE), National Parks and Wildlife Service (NPWS) and community groups to collect water samples for testing.
"Once we receive the results, we'll share this information with the community," she said.
"According to Environment NSW, the colour of the water is caused by oxidation of iron rich shallow groundwater, which results in the orange scum on the bed sediments and water."
Saving Lake Cathie and Revive Lake Cathie members have both questioned if whether the current state of the water is potentially harmful to its inhabitants.
The groups have been in contact with staff from council and other lake stakeholders.
Stewart Cooper from Saving Lake Cathie said the red brown deposit is particularly noticeable in Lake Cathie at low tide, west of Kenwood Drive bridge.
Mr Cooper has received information the material in the lake is known as iron floc.
"The drought has dried out the lake bed and when the soil was exposed to the air, it started a chemical reaction," he said.
"This was exacerbated as a result of the fresh water that filled the lake system up in February and March, creating an acid water rich in iron.
"When the lagoon was opened to the sea, the salt water has nullified the acid but left this iron flock along with other minerals.
"Of particular concern is Lake Innes which has a lot more of these soils.
Revive Lake Cathie president Danielle Maltman said with high levels of acid sulfate soil generated in Lake Innes, maintaining higher water levels in Lake Innes is critical.
She said after consultation with the relevant stakeholders, the group has received information the substance is the estuary's response to an opening combined with the acid store generated during the 2019-2020 drought.
"This has been exacerbated by reduced lake levels resulting in over 1000ha of lake bed sediments being exposed to oxygen for prolonged periods and at depths never seen before."
When asked if the lake was still safe for recreational activity, the council spokesperson said information people can contact DPIE or call NSW Environment Protection Authority's Environment Line on 131 555.