This research presents an integrated approach to organic petrographical and geochemical characteristics of the Upper Permian Newcastle Coal Measures outcropping in the northern Sydney Basin, southeast Australia. Twenty-seven coal, coaly mudstone and mudstone samples were collected and analyzed by using organic petrography (maceral composition and vitrinite reflectance) techniques, Rock–Eval pyrolysis, bitumen extraction and gas chromatography - mass spectrometry (GC–MS). The obtained results indicate that the samples exhibit promising gas-prone source rock potential and contain a predominantly terrestrial in origin organic matter, with limited contribution by marine organisms. The prevalence of terrestrial organic matter is inferred by the presence of collotelinite and sporinite macerals in most of the samples and the ternary plot of C27, C28 and C29 regular steranes. Further, the low C27/C29 ratio, the cross-plots of C27/(C27 + C29) regular steranes vs. Pr/Ph ratio, the C27/C29 vs. Pr/Ph and the C24 tetracyclic/C26 tricyclic terpane ratio point also to the terrestrial origin of the organic matter. The obtained values of vitrinite reflectance, Tmax, OEP27–31 and CPI25–33, along the cross plots of 20S/(20S + 20R) versus ββ/(ββ + αα) suggest that the samples are immature and were subjected to a low burial depth. The examined samples indicate accumulation in a delta-plain environment of deposition, under fluctuating oxic/anoxic conditions, in a humid climatic zone that is characterized by dry periods, interrupting the longer-termed humid climatic regime. This research adds knowledge on the source rock potential in the northern Sydney Basin and on the environmental and climatic setting of a time interval just prior to the major Permian - Triassic climatic crisis.