An 18-year-old man was arrested and removed from the Domain at the very start of the organised rally in the morning but police said he was not a participant in the event.

Rally organisers had failed in their last-minute bid on Monday to secure an exemption from public health orders that limit protests in Sydney to 500 people. The NSW government refused to exempt the event and warned attendees they could be arrested and fined.

About 3500 people had put themselves down as attending on the Facebook event for the rally and police conservatively estimated 2000 to 3000 showed up on the day.

Organisers met with senior police early on Tuesday and settled on a plan that would allow the seated rally to go ahead, with the crowd separated into 500-person segments, but cancelled the planned march that would have started at the park.

At the rally, protesters rejected Australia Day as illegitimate and called for justice for Indigenous people who have died in custody and for reforms to address Indigenous over-representation in prisons.

Bundjalung woman Vanessa Turnbull-Roberts told the crowd that change was needed in the courts and child protection system and that Australia Day should be “completely abolished”.

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Ms Turnbull-Roberts and other speakers lambasted the police and said they were part of a racist system.

“We have an authority and a police force that abused their power,” Ms Turnbull-Roberts said.

“We will achieve liberation in this country ... Free from these people in blue.”

Repeated chants of “always was, always will be Aboriginal land” rang out through the event. Many speakers said January 26 protests would not stop until the national public holiday was abolished and Australia addressed Indigenous disadvantage.

NSW Police Assistant Commissioner Mick Willing said that, while the protest was unauthorised, protesters had largely been respectful, cooperative and compliant with public health restrictions.

“Taking into account the heat out there, the potential disruption to traffic and most importantly the safety of those involved in the protest, it was important for us to reach some sort of a compromise to ensure it was conducted as safely as possible,” he said.

“We understand that these issues are important to lots of people so I think at the end of the day, people were able to express their views [and] get in and out of that protest zone as safely as possible. So we are pleased at this point.”

Dozens of officers, including from the riot squad and mounted unit, were deployed to the event.

Organisers encouraged attendees to check in using QR codes when they arrived and the vast majority of people were wearing masks.

While some attendees were unhappy the march was not proceeding, activist Lizzie Jarrett said organisers did not want arrests and had made a “common sense” deal with police that would allow the gathering in the Domain to go ahead.

“So we are going to stick to our word ... We don’t want any reason for these coppers to f--- with us today,” Ms Jarrett said.

Assistant Commissioner Willing said it was difficult for police to hear some of the accusations levelled at them but officers at protests like Tuesday’s were focused on doing their jobs professionally.

“They are good people, they do a good job and they have the support of the community, I know that,” he said.

He said police were committed to working in partnership with the community to deal with issues like the ones raised by Indigenous protesters.