Peatlands cover about 3% of the Earth’s land surface, but are the largest terrestrial carbon store and are important for freshwater storage. In Australia, nationally protected peatlands (called upland swamps) exist in the catchment headwaters for Sydney’s drinking water supply. In this region, longwall mining of underground coal seams can result in subsurface fracturing, land subsidence, and, potentially, peatland drainage. This study presents the water balance modelling results for an upland peat swamp before and after it was undermined in 2020. Following a detailed field campaign, a conceptual lumped hydrology model was developed to estimate the local water balance, with a Nash Sutcliffe Efficiency of 0.85 for the modelled storage of the intact swamp. After undermining, the water balance of the swamp changed, with higher deep seepage rates and reduced surface water discharge rates. For the first time, these findings detail the hydrologic effects of longwall mining on peatland environments. Based on these findings, broader catchment management initiatives are recommended to prevent or limit further water extraction from upland swamps, including incidental water losses associated with subsidence.