The origin of carbonate muds (grain sizes < 63 µm) in shallow, nontropical marine environments is poorly documented. Coarse-grained carbonates often characterize coastal temperate seafloors, but many such deposits also have abundant carbonate muds. Spencer Gulf, a large, shallow embayment along the southern Australian margin (< 60 m water depth), contains mixtures of carbonate gravels, sands, and muds, with muds constituting up to 84% volumetrically. Benthic environments include dense seagrass meadows, sand barrens, and rhodolith pavements where bivalves, benthic foraminifera, coralline algae, and bryozoans dominate heterozoan carbonate assemblages. Mud grain morphologies were investigated using scanning electron microscopy, leading to the conclusion that muds are predominantly composed of skeletal fragments (bivalves, benthic foraminifera, ascidians, echinoderms, and coralline algae), interpreted to have formed due to breakdown of rigid material via maceration. X-ray diffraction analysis confirms that these muds contain combinations of intermediate-Mg calcite, low-Mg calcite, and aragonite; with concentrations varying among locations according to skeletal grain types. Spencer Gulf muds differ in mineralogy and composition from those of classic models of tropical and deep-water carbonate mud deposition. Unlike shallow-water, tropical carbonate muds, these temperate muds are not dominated by aragonite and there is no evidence of carbonate precipitation from seawater. Pelagic organisms contribute only trivial amounts to these deposits, in contrast to deep-water muds.