In NSW, many small businesses run from a house need no council approval. The Codes SEPP lets a dwelling be used for a home occupation, home business or home industry as exempt development, provided the use fits the legal definition. That means it is carried on by permanent residents, does not affect neighbourhood amenity through noise, smells, traffic or otherwise, does not display goods and does not involve retail sale. A home occupation cannot employ anyone other than residents. A home business or home industry can employ up to 2 people who are not residents, but must stay within the floor area limit in clause 5.4 of the council’s LEP, which is never less than 30 square metres. Bed and breakfast accommodation and home food manufacture can be complying development. Anything outside these limits needs a development application. The definitions do the work here, so they are worth reading closely before you start.
Key takeaways
- A home occupation, home business or home industry can be exempt development if it meets its definition and the general exempt development requirements, but not if it involves manufacturing food products or skin penetration procedures.
- A home occupation cannot employ non-residents; a home business or home industry can employ up to 2 non-residents.
- None of them can interfere with neighbourhood amenity, display goods, display signage other than a business identification sign, or involve retail sale of items.
- Home businesses and home industries must comply with the maximum floor area set in clause 5.4 of the council’s LEP, which will be no less than 30 square metres.
- Bed and breakfast accommodation (generally up to 4 guest bedrooms, or the LEP limit) and home businesses manufacturing food can be complying development, subject to standards; short-term rental accommodation is regulated separately under the Housing SEPP.
Who this is for: home owners and tenants in Sydney, the Central Coast and regional NSW who run, or plan to run, a business from home, such as a consultancy, studio, clinic, trade base, home bakery or B&B, and want to know whether council approval is needed.
What is the difference between a home occupation, home business and home industry?
The NSW Department of Planning, Housing and Infrastructure’s fact sheet on home-based enterprises sets out the definitions used in the Codes SEPP and LEPs. A home occupation is an occupation carried out in a dwelling, or a building ancillary to it, by one or more permanent residents that does not:
- employ persons other than those residents;
- interfere with the amenity of the neighbourhood through noise, vibration, smells, fumes, smoke, dust, waste, traffic generation or otherwise;
- display goods, whether in a window or otherwise;
- display any signage other than a business identification sign;
- involve the sale of items, or the exposure or offer of items for retail sale.
The fact sheet explains that home business and home industry are defined similarly, with one difference: they may employ up to 2 people who are not residents of the dwelling. A home industry involves light industrial activity rather than a service business. The fact sheet gives the example of a solo trade photographer or graphic designer working at home and online as a home occupation.
| Use | Non-resident employees | Typical examples | Usual pathway |
|---|---|---|---|
| Home occupation | None | Consultant, designer, bookkeeper, online seller without retail visits | Exempt, if definition met |
| Home business | Up to 2 | Small professional practice, tutoring, hairdressing (if no skin penetration) | Exempt, if definition and LEP floor area met |
| Home industry | Up to 2 | Small-scale craft or repair workshop | Exempt, if definition and LEP floor area met |
| Home business manufacturing food | Up to 2 | Home bakery, preserves, catering preparation | Complying development (with food safety requirements) |
| Bed and breakfast accommodation | Run by permanent residents | Guest rooms in an existing dwelling | Complying development, if standards met and not bushfire prone |
When is a home business exempt development?
The fact sheet confirms that under the Codes SEPP a dwelling may be used for a home business, home industry or home occupation as exempt development, provided the use meets the definition and does not involve manufacturing food products or skin penetration procedures. A home business or home industry must also comply with the maximum floor area in clause 5.4 of the LEP, which will be no less than 30 square metres. The general exempt development requirements in clauses 1.15 and 1.16 of the Codes SEPP also apply, so the land must not be excluded and the building work, if any, must itself be lawful.
Signage is allowed too: one sign of up to 1 square metre for a home business, home industry or home occupation in a residential, rural or conservation zone, flat mounted or painted on an existing building wall, fence or boundary wall.
What about bed and breakfasts and food businesses?
Bed and breakfast accommodation can be complying development. The fact sheet describes it as an existing dwelling where temporary or short-term accommodation is provided commercially by the permanent residents, with meals for guests only, no cooking facilities in guest rooms and no dormitory-style accommodation. Standards include a maximum of 4 guest bedrooms (or the LEP maximum, which cannot be less than 3), at least one guest bathroom, a fire extinguisher and fire blanket in the kitchen, and one off-road parking space per guest bedroom. B&Bs cannot be complying development on bushfire prone land.
A home business manufacturing food can also be complying development, if it does not involve changing the building’s use and complies with AS 4674-2004 for food premises, together with the Food Act 2003 and the Food Standards Code. Food businesses must hold a NSW Food Authority licence or notify the Authority, depending on the activity. Short-term rental accommodation, such as letting a whole house on a booking platform, is not covered by these rules; it is regulated under State Environmental Planning Policy (Housing) 2021.
When do you need a DA?
- You need more than 2 non-resident employees, or any non-resident employee for a home occupation.
- Customers or deliveries will generate noticeable traffic or parking in the street.
- You want to sell goods on site or display them.
- The floor area exceeds the LEP clause 5.4 limit.
- The business involves skin penetration (tattooing, cosmetic injecting) or food manufacture outside the complying standards.
- Building work is needed that is not itself exempt or complying, such as converting a garage to habitable space.
- The land is excluded from exempt or complying development, for example some heritage or environmental land.
In those cases, a DA for the use (and any building work) is assessed against the LEP zone, the DCP’s home business chapter (Wollongong DCP 2009 Chapter C10 and Central Coast DCP 2022 Chapter 2.16 are examples) and the impacts on neighbours.
Definitions
- Home occupation
- An occupation carried out in a dwelling by permanent residents, employing no one else, with no amenity impact, no goods displayed, no retail sale and only a business identification sign.
- Home business
- A business carried out in a dwelling by permanent residents that meets similar limits but may employ up to 2 non-residents.
- Home industry
- A light industrial activity carried out in a dwelling or ancillary building by permanent residents, with up to 2 non-resident employees.
- Bed and breakfast accommodation
- Short-term accommodation provided commercially by the permanent residents of an existing dwelling, with meals for guests only.
- Clause 5.4
- The LEP clause that sets maximum floor areas and other limits for certain uses, including home businesses and home industries.
Frequently asked questions
Do I need council approval to work from home in NSW?
Usually not, if the work fits the definition of a home occupation, home business or home industry and meets the exempt development rules. A DA is needed when the business exceeds those limits.
How many employees can a home business have?
Up to 2 people who are not residents of the dwelling. A home occupation cannot employ anyone other than residents.
Can I have a sign for my home business?
Yes. One sign of up to 1 square metre can be exempt in a residential, rural or conservation zone, flat mounted or painted on an existing wall or fence.
Is Airbnb the same as a bed and breakfast?
No. Bed and breakfast accommodation is run by the permanent residents of the dwelling with meals for guests. Short-term rental accommodation is regulated separately under the Housing SEPP.
Where a home business needs a DA, we prepare a short, focused Statement of Environmental Effects addressing traffic, parking, hours and amenity, and our pathway advice confirms first whether you need one at all. To check your situation, request a fee proposal.
Sources and references
- NSW Department of Planning, Housing and Infrastructure, Home-based enterprises: rules for exempt and complying development (May 2024), accessed October 2026
- Wollongong DCP 2009, Chapter C10 Home Business and Industry, accessed October 2026
- Central Coast DCP 2022, Chapter 2.16 Home Based Employment, accessed October 2026
- State Environmental Planning Policy (Exempt and Complying Development Codes) 2008, accessed October 2026
Information disclaimer. This article is general planning information prepared by the URBA Planning Team and is current at the date of publication. It is not planning, legal or financial advice for any specific property. Planning instruments, development control plans, state policies and the National Construction Code are amended regularly and councils interpret them differently; the controls quoted here should be confirmed against the versions in force at the date of lodgement and against the consent authority’s current requirements. Reliance on this article is at the reader’s own risk. URBA Planning, a division of Contrive Consultants Pty Ltd, accepts no liability for loss arising from its use. For advice on a specific site, contact URBA for a fee proposal.