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Retaining harvest residues (HR) in the field is considered an option to recycle carbon (C) and nutrients in short-rotation plantations, but the fate of HR in the soil remains unclear. The effects of HR management and nitrogen (N) availability on soil organic matter (SOM) pools and microbial community structure of forest plantations represent a major knowledge gap. To fill this gap, we explored how management scenarios that differed in the amount and type of HR [removal of all residues (-R), residue retention without (+R/-B), or with bark (+R/+B)] and N availability [0 (-N) or 200 kg N ha-1 (+N)] influenced microbial activity and structure and SOM fractions in a recently afforested grassland. Specifically, we measured HR decomposition, carbon dioxide efflux (respired CO2), phospholipid fatty acid (PLFA), and determined changes in particulate (POM) and mineral-associated organic matter (MAOM) over 12 months using differences in δ13C natural abundance between Eucalyptus HR and grassland soils (δ13C ∼-28 ‰ and -13 ‰, respectively). Microbial respiration was stimulated by HR retention (+R). Bark retention reduced HR half-life by ∼70 days, on average, while N had little influence. Bacterial groups (Gram-positive and Gram-negative) were the primary decomposer of eucalypt HR, while Actinobacteria used more of the former soil organic carbon (SOC). +R/+B increased fungal biomarker PLFA concentration and fungal:bacterial ratio, suggesting a key role of Fungi in the fragmentation of woody HR. N influence on microbial community structure and SOM pools was dependent upon HR management. Retaining HR increased SOC concentrations, most significantly in the 0–1 cm soil depth and POM fraction, and when bark was included. +R/+B resulted in higher POM-C concentrations (up to +37%) and more depleted δ13C-POM compared with -R and +R/-B, respectively. Collectively, our results suggest it is feasible to increase POM-C and fungal abundance through HR management practices in the early stages of decomposition, which may potentially contribute to SOC stabilization in the long-term. Yet our findings remain to be tested in long-term studies, we provide quantitative evidence of the potential of a more conservative HR management to contribute to the sustainability of eucalypt plantations.