But Federal Environment Minister Greg Hunt's announcement that a 50-hectare section of the Malabar Headland will be made into a state national park has been dismissed as "cheap politics" by Labor, which claims it tried to make the same handover three years ago.

Mr Hunt said he hoped the land would be transferred to the state government by June 30, adding that the federal government was "steadfast" in ruling out the sale of any part of the 160-hectare site, just 12km from central Sydney.

"The whole of the headland will be kept in public hands for perpetuity," Mr Hunt said.

However, the assurance the headland would not be sold off only came after revelations in January that as much as one-third of the land was being assessed for massive redevelopment.

A report commissioned by the Department of Finance, obtained by Fairfax Media under Freedom of Information laws, identified the headland as "surplus to requirements" and said it would generate investment of "up to $1 billion" if it was sold.

The potential development included 2211 units across four- or five-storey buildings, terraces, aged-care villas and mixed-use buildings with commercial and retail, according to the few details to slip through the heavily redacted reports.

The documents, including a briefing note to Finance Minister Mathias Cormann, prompted public outcry and a promise from Mr Hunt that the "cathedral of nature" would stay in public hands forever.

Mr Hunt, who stressed on Wednesday that the sale was never contemplated by cabinet, said the government made the "very clear" decision about the headland's future two months ago.

"When this [proposed sale] came up, we killed it on the same day," he said.

The former Labor government had set out its own conservation plans for the heavily contaminated headland, an ambition that stalled in 2012 when the NSW Rifle Association successfully fought its eviction from the central 110-hectare part of the site.

Member for Kingsford Smith, Matt Thistlethwaite, said Labor had been ready to hand back the 50-hectare eastern parcel, but the O'Farrell government refused to accept it because of the ongoing presence of the recreational shooters.

"And now they wait for an election campaign to announce this. It's cheap politics. This should have been a national park in 2012," he said.

Mr Hunt, who said the the shooters would only move once there was a "viable constructed alternative", also announced $5 million for remediation to allow a evicted riding school to return, and to improve safety and amenities of the Anzac rifle range.

The announcement has been cautiously welcomed by the community group, the Friends of Malabar Headland, which raised the shooters as an ongoing issue for any future plans.

"We remain skeptical until we see documented proof of a commitment of money in the budget to build a new Shooting Range elsewhere and to move the shooters to their new site," spokeswoman Claire Bettington said.

"Nothing will happen to the Eastern Bush until the shooters have gone, as the Eastern Bush forms part of the Safety Template for the Shooting Range."

NSW Minister for the Environment Rob Stokes confirmed the remaining central portion of the headland, which includes the rifle range and area considered for development, would also be transferred to the state government once it was remediated.

The cost of this, put at between $95 million and $150 million, would be borne by the federal government, he said.

"We're very keen for the whole site to be incorporated into Malabar Headland's national park as soon as possible," Mr Stokes said.

But Labor's Michael Daley, the Member for Maroubra, said the area's future as a "fully fledged" national park depended on how much money the federal government allocated to relocate the shooters and remediate the rifle range.

"I encourage them to put the money back into the budget that Joe Hockey took out last year," Mr Daley said.

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