[2][3] Four months after extensive repairs, the ship became beached close to Pittwater Road at Collaroy on 20 January 1881.

[4] A navigational error was given as a cause, when the ship attempted to avoid Long Reef near Sydney in heavy fog, without the captain's order.

[5][6] A report in the Sydney Evening News suggests the Collaroy was in an unofficial race with another coastal steamer, the Morpeth.

[7] Ship's mate Richard Drew stated that he did not see the Broken Bay light, several miles to the north of Long Reef.

[3] The master Captain Martin Thompson and mate Mr Richard Drew had their licenses suspended for three months.

The steam tug Commodore again assisted in pulling Collaroy down the purpose-built ramp when the cable snapped.

On the third attempt, hydraulic power was employed at the stern of the ship and with the assistance of the tug Leveret, the Collaroy was freed, and hauled from the beach at high tide, 7:30 pm on 9 September 1884.

[13] At the time of the beaching, the ship's cargo consisted of 7 bales of wool, 170 bags of potatoes, 200 hides, 40 casks of tallow, 40 pigs and 30 sheep.

All twenty-four passengers (including 14 saloon and ten in steerage) were successfully brought ashore with their luggage in the starboard lifeboat, in three or four trips.

The ship encountered fog five miles north of the entrance to Eureka Harbour on 7 July and was wrecked.