IT didn't cost much to build but that could change dramatically if a New South Wales family refuses to tear down a child's cubby house erected in their backyard without council permission.

Penalties of up to $1.1 million - plus a further daily fine of $110,000 - await the family if they don't agree to demolish the structure.

The cubby, which measures just 1.5m by 1.5m, was deemed a "fire risk" by Wollongong City Council, which wants it removed by January 5.

Earlier this year, Sonja Keller and husband Andrew Bergmann used leftover building supplies to build the cubby for their son, Yaan, 9, behind their home at Tumbling Waters Resort in Stanwell Tops.

They returned from holidays before Christmas to find mail telling them to remove the cubby as it posed a bushfire threat and they did not have "development consent".

"Council has become aware that a cubby house has been erected within the premises adjacent to a dwelling; within a bushfire prone and environmentally sensitive area, without development consent," the council wrote.

"Failure to comply with the order is an offence under section 125 of the (Environmental Planning and Assessment) Act. The maximum penalty for that offence is $1,100,000.00 and a further daily penalty of $110,000.00.

"If the order is not complied with, Council may give effect to the order and recover the costs of doing so from you."

Mrs Keller said council staff first inspected the cubby house earlier this month.

"Three people from the council came to inspect some of the work we had done at the resort," he said.

"I thought they were joking when they said they needed to look at the cubby house."

She said the cubby was barely visible from the street and no more of a fire risk than other garden furniture.

"This decision is a joke. It's ridiculous to say it's in a fire-sensitive area," she said.

"The garden shed is in a fire-sensitive area. The pergola is in a fire-sensitive area. The whole house is in a fire-sensitive area."

Mrs Keller said she would try to fight the decision, but they could not afford to pay the whopping fines.

"The council should be encouraging people to spend time with their families, especially this time of year," she said.

"My little boy got $50 for Christmas and asked if that was enough to fight council."