Abstract The prospect of biofuels as a transport alternative fuel in Australia is reviewed and discussed in this paper. The Australian transport sector is the second largest energy consuming sector which consumes about 24% of total energy consumption. A part of this energy demand can be met by ecofriendly biofuels. A wide array of different biofuels feedstocks including Australian native species, their distributions, oil content, traditional uses are reviewed and listed in the descending order of their oil content. The world biofuel scenario as well as the 20 largest biofuel production countries and their mandates on biofuels blending with petroleum diesel are presented. Australia’s biofuel production, consumption, production facilities and future investment projects are also reviewed and discussed. The study developed a biofuel supply chain for Australia and found that the second generation biofuels have better prospects as a future alternative transport fuel in Australia. These biofuel feedstocks are readily available and can overcome the shortcomings of the first generation biofuels, such as socio-economic, environmental and food versus land use challenges. Although some research is in progress, further study is needed on the process development of second generation biofuel production at commercial scale in Australia and abroad.