Nutrient offsetting is a market-based mechanism involving point source polluters choosing to pay for catchment restoration, which is offset against their nutrient discharge. Currently, despite its potential, nutrient offsetting lacks scientific robustness in methodology. Our research assessed the environmental equivalency of three nutrient sources, sewage treatment plant (STP) discharge and aquaculture pond discharge, and simulated soil erosion runoff (soil slurries prepared in the laboratory). This was done by measuring both algal bioassay response and dissolved oxygen (DO) demand response as two key measures for the environmental impacts from different nutrient sources, coupled with measurements of their key nutrients. We found that total nitrogen, despite being used widely for nutrient offsetting, was poorly correlated with algal response and DO demand. For algal responses, total dissolved nitrogen (TDN) was found to be a better measure, particularly for soil erosion. In addition, the same concentration of TDN from the soil erosion had higher algal responses than that from the STP and aquaculture pond discharge. For DO demand, dissolved organic carbon was not the only driver after the three nutrient sources were added to low-nutrient receiving waters. Instead, the nutrient parameters that correlated most with the DO demand were nutrient source-specific. Chemical characterization revealed that soil slurries contained organic compounds that were more bioavailable, i.e., glucose and fatty acids, than STP (small organic acids) and aquaculture effluents (lipophilic compounds). Therefore, to ensure equitable environmental impacts from offsetting between different sources, both organic carbon and nutrient parameters from sources need to be considered. Our research provides a direct comparison of the environmental equivalency between different nutrient sources for nutrient offsetting to underpin the nutrient offsetting policy in Australia.