This fungus is commonly called a “shelf fungus.” The main body of the fungus is inside the tree slowly digesting (rotting) the heartwood. The fungus will not kill the tree, but over time can cause a substantial decay of the heartwood, which results in a structural weakening of the tree. The internal decay of the wood will make the tree more susceptible to breakage during wind storms and may cause the tree to fall over or break for no apparent reason.
There is no treatment for this heartrot condition. You should keep your tree pruned, properly watered and fertilized to prompt good vigor. If limb breakages begin, it will probably necessitate the removal of the tree for safety reasons. On the Central Coast old oaks, eucalyptus trees, and other hardwood trees are the most prone to damage by fungi in the “shelf mushroom” group.