If you’re intending to build what the Building Code of Australia defines as a ‘habitable room’ it’s definitely going to need some form of development approval and building certification depending on the rules and regulations pertaining to your site and location.
The definition of a non-habitable room includes a storage room, pantry, bathroom, laundry, toilet, hallway, walk-in wardrobe, corridor, gazebo, cabana, photographic darkroom, shed, and other types of rooms where human beings wouldn’t spend a significant amount of time. In most locations, it’s possible to build a non-habitable room up to a certain size without approval (NSW up to 20sqm if basic conditions are met).
The definition of a habitable room includes a bedroom, study, sewing room, dining room, living area, media room, home office, guest room, sleepout, etc. These rooms are literally an extension to the livable space of your primary residence, even if separate to the main building, and authorities must, therefore, ensure they are constructed so as to be safe and suitable for human habitation. Compliance with regulations is mandatory.
What could go wrong if you complete a non-compliant backyard development? Many things such as potentially voiding the insurance on your main house, being forced to remove or modify your non-compliant structure, not being insured for any injury to an occupant, and other potential risks which could arise.
Although compliance with habitable rooms and granny flat developments may cost quite a bit to achieve, think of it as an investment. It costs the same to construct the building in any case but a compliant structure adds value to your home whereas a non-compliant structure could be offputting to future buyers.