The Tamworth Services Club has called off all gigs set to take place over the 10-day Tamworth Country Music Festival in January, including concerts by multi-Golden Guitar winning Luke O'Shea and Hussy Hicks.

Services Group Tamworth CEO Kristian Brooks said he's "very disappointed", but current health orders left the board with "no choice".

"With people wearing masks and the one person per two square metres rule, it's just not viable for us," he told the Leader.

"The difference between us and a lot of other hospitality places in town is we're land locked, so we've got no outdoor areas of any substance to have any entertainment outside."

Mr Brooks said the density restrictions mean their concerts would be capped at 50 per cent of their usual capacity.

"We're not a big club so we would have had to run it with very limited people, so it's not viable, and then downstairs our little auditorium seats about 170 to 180 people," he said.

"Imagine an artist coming to do a paid show downstairs and they sell 150 to 170 tickets and pay their accommodation and everything else, then they've got to come to a venue that can only sell 90."

The club made the decision during a board meeting on Wednesday morning.

All ticket holders will be issued full refunds in the coming weeks.

Mr Brooks said the announcement will come as a big loss for the club.

"It provides a big financial boost to our business, but it's also a big expense for us as well and with reduced numbers we just can't feasibly make it work," he said.

Despite the decision, Mr Brooks said he was supportive of the festival going ahead and encouraged people to take advantage of the great line-up of events on offer.

"If you still wish to come there's lots of concerts in the park and outside concerts which seems to be the key in these COVID times," he said.

TCMF stakeholders and local venue owners met on Friday, and announced they will push on with plans for the 50^th festival.

Despite a return of the one person per two-square-metre rule for hospitality venues including pubs, clubs, restaurants and cafes, there are no density limits for outdoor settings, so outdoor concerts in the park and buskers will remain unaffected.

Indoor events will proceed in a COVID-safe way, with the public encouraged to contact individual venues to see how events are being impacted.

The restrictions will remain in place for NSW throughout the festival, until Thursday, January 27.