While awaiting loading of one hold with coal alongside a wharf, she was severely damaged by fire at Newcastle, 12 January 1906 after another hold with a nitrate cargo caught fire. The resultant fire and explosions bowed and twisted her iron hull. She was towed to Sydney for use as a hulk, however was too badly damaged and was scuttled in Saltpan Creek, Middle Harbour.
Currently the Itata is often used as a training site for wreck diving dive courses.