The more common and widespread species, N. melacarpa, typically grows on rotting wood and soil in various forest and heathland habitats, while the rarer N. pachyphylla is found mainly on granite and sandstone substrates.

[2] In his original 1889 description of what would become Neophyllis, Wilson recognised its similarity to Cladonia lichens in its thallus structure, spores, and round fruiting bodies (apothecia), but noted several distinctive features that warranted a new genus.

These included its uniquely double-convex squamules that became almost cylindrical at their tips, black apothecia positioned near the ends of branches, and distinct microscopic features of its paraphyses (sterile cells among the spore-producing structures).

It wasn't until molecular studies in the late 1990s that Neophyllis, along with another Australasian endemic genus Austropeltum, was transferred to the family Sphaerophoraceae based on both ontogenetic and molecular evidence[4][5] The genus comprises two recognised species:[5] While historically these species were distinguished primarily by morphological features and habitat preferences, modern taxonomic treatment recognizes them as chemically distinct taxa.

[5] Some specimens from New Zealand containing only melacarpic acid may represent an additional, currently undescribed species within the genus, though further research is needed to confirm this taxonomic interpretation.

The squamules can range from flat and elongated to more cylindrical and coral-like in form, typically appearing bright green to olive-coloured when wet, and shifting to yellowish-green or brownish when dry, often with a glossy surface.

In shaded forest environments, it typically grows on wood, particularly favouring rotting logs, buttresses and stumps of old eucalypts, as well as the trunks of Nothofagus and Athrotaxis trees that provide soft, moisture-retaining substrates.

In more exposed, sunny locations, particularly in high-rainfall areas of western and southwestern Tasmania, the species can be found growing on soil in various settings, including crevices of quartzitic boulders, buttongrass (Gymnoschoenus sphaerocephalus) moorland, alpine or subalpine heathland, and coastal granite outcrops.

[5] In contrast, N. pachyphylla is considerably rarer and has been documented from only a few regions: the Grampians in Victoria, parts of eastern Tasmania, and the Southern Tablelands of New South Wales.