There was a further discharge of wastewater to the lake on July 16 while the Taupō District Council was working to fix the problem.
Waikato Regional Council's investigations manager Patrick Lynch said there had been a thorough and independent investigation into the July incidents.
"There is no doubt this was, at the time, a terrible incident with far-reaching impacts on iwi, residents, water users and visitors," said Lynch.
Repair work at the site of the wastewater spill on Lake Terrace, Taupō. Photo / File
"The purpose of the Resource Management Act (RMA) is very clear – that is to promote sustainable management of natural and physical resources, and this incident clearly goes completely against that purpose.
"However, the RMA does allow for 'accidents' in situations where the incident was not foreseeable, was beyond anyone's control and was adequately mitigated. In our view, that is the situation here.
He said due to the "unique set of circumstances" it was not appropriate for anyone to face formal enforcement action.