Moruya Fire and Rescue captain Mark Gould was first on the scene and said crews arrived to a "well-alight" two-storey shed.

"There were flames through the roof of the shed which had a living area in the upstairs section," he said.

"The shed was located beside the main house with the wind blowing in the direction of the house so crews immediately set up protection lines while working to extinguish the shed."

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The fire completely destroyed the shed as well as two cars parked nearby.

All residents of the property were safe.

Mr Gould said the fire appeared to have started while the owner was making candles.

"They were making candles in the shed and set something alight. They thought they had extinguished it and left the shed, but came back to discover the place in flames," he said.

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Mr Gould said two units from Fire and Rescue as well as brigades from the Broulee, Mogo and Moruya Rural Fire Service attended the call out to assist with water supply and fire attack.

By 10.15am the fire was under control, but crews remained to further extinguish and mop up the scene for safety.