This study aimed to examine how biochar and Acacia species would affect biological nitrogen fixation (BNF) and water use efficiency (WUE) of understorey Acacia species as well as soil carbon (C) and nitrogen (N) pools 15 months after biochar application in the suburban native forest of subtropical Australia. This experiment was established with wood biochar applied at 0, 5, and 10 t ha−1 at 20 months after prescribed burning. We collected foliar and soil samples 15 months after biochar application and used N isotope composition (δ15N) and carbon isotope composition (δ13C) to assess the BNF and WUE of two understorey Acacia species (Acacia leiocalyx and Acacia disparrima). We also characterised soil C and N pools and their δ15N and δ13C. Biochar did not influence Acacia plant BNF and WUE 15 months after biochar application. However, the BNF of A. leiocalyx was significantly greater compared with that of A. disparrima. The soil under A. leiocalyx had greater NH4+-N (i.e., 10–20 cm) but lower δ15N than A. disparrima. This study represents one of the few attempts to apply the 15N natural abundance (δ15N) techniques to quantify the soil–plant–microbe interactions for N cycling in a native forest ecosystem. Understorey A. leiocalyx was more effective in improving N recovery post-fire via BNF. Soil under A. leiocalyx had greater N availability with lower δ15N, influencing plant available N sources and δ15N. Thus, A. leiocalyx would be able to fix more N2 from the air compared with that of A. disparrima in the suburban native forest ecosystem subject to periodical fuel reduction prescribed burning.