I have investigated living on a boat in Sydney Harbour, and was quite serious about it. Now that I'm in business doing marine electronics, I can't live on a boat though!
The appropriate laws are contained in the "Management of Waters and Waterside Lands Regulations—N.S.W."
The maximum amount of time you can live on board is 21 days in every 6 months. Beyond this, your vessel becomes a "moored houseboat," and there are requirements.
Firstly, you need special permission from NSW Maritime, or from the Crown.
Before it even comes down to a NSW Maritime decision, you must have 2 things:
1. Written permission from the landowner who owns the land you will use to access your vessel, that they approve of the use of the land for that purpose;
2.Written approval from the council of the nearest adjoining land, that they do not dissapprove of you living on board the vessel, and the standard of living therein.
I made myself an environmental management plan for my vessel, including toilet, noise, water, laundry, access, waste, and so on, so as to meet all requirements stated in the regulations. Having lodged a written request with council, I was contacted by their health man, but they never got back to me. One phonecall to Maritime was to be returned but never was. I didn't pursue Maritime because I didn't have the Council approval yet anyway.
This is now a long post, so I won't quote any legislation. Start with section 50, and work your way around the appropriate bits. Go to http://www.legislation.nsw.gov.au/, click on "Browze A-Z in force" then go to "M" under Regulations.
Experience shows you will probably you'll spend lots of time and get nowhere. A friend of mine tried before I did and got just as far as me. If you want more details, contact me via my contact page at www.invisiblecommunications.com.au.
All the best,