A NSW Police spokeswoman said two people on board the boat at the time had called NSW Fire and Rescue to help them pump water from the vessel,before the pair fled to safety on a small boat. They were not injured.
Police arrived to find the boat submerged under about 10 metres of water.
A Transport for NSW spokesman said plans were under way to remove the privately owned vessel from the bay as it could continue to break apart and create hazards for other boaters.
People are being urged to steer clear of the salvage operations.
“A boom has been deployed to contain any pollutants if they appear. Reports at this stage indicate that there were only small amounts of pollutant on board and the fuel tanks were empty,” the spokesman said.
“Further enquiries will be made with the owner about the incident.”