Under federal law, the telecommunications giant is required to connect new urban customers within two days, provided their property has an existing, working, telephone line.
The Australian Communications and Media Authority on Friday said Telstra had successfully connected 88.6 per cent of new connections within that time frame during the 2012/13 financial year, which is below ACMA's 90 per cent benchmark.
ACMA chairman Chris Chapman said the $510,000 fine took into account that the 2012/13 financial year was marked by a number of extreme weather events and Telstra had since made a "significant effort" to improve its performance.
A Telstra spokesman said damage to the network from a string of natural disasters had impacted on the telco's ability to connect new customers during 2012/13.
"Last (financial) year, we faced unprecedented damage to our network from natural disasters," he said in a statement.
"We fixed more than one million faults for our customers and a number of events, such as the Queensland floods, Tasmanian fires and Warrnambool Exchange fire, placed great strain on our network and resources across the country," he said.
He said Telstra accepted ACMA's finding that it missed the key benchmark and apologised to customers affected by the delays.
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