Firefighters were called to a property on Balfour Street at 10pm on Wednesday following reports of a house fire.

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"The fire turned out to be in a large back shed being used as a residence," a statement by Fire and Rescue NSW (FRNSW) said.

"A slow combustion fire, which had a flue installed running through a mezzanine level, ignited densely packed boxes around it causing heavy structural damage to the shed frame, roof and loss of most items stored in the shed."

MAP: The street where the fire occurred

NSW Rural Fire Service (RFS) Oberon brigade crews also attended the blaze and arrived on scene first.

"Oberon RFS were first on scene knocking down the flames with both agencies working together to extinguish the fire and render the structure safe," FRNSW said.

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FRNSW crews said the incident was a confronting reminder for anyone who has a fireplace in their home.

"This is a timely reminder to be aware of what you store close to any heater including the flue."

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FRNSW Inspector Steven Evans said NSW law states that anywhere being used as a residence, including a shed or caravan, must have a working smoke alarm fitted.