People who stay in short-term holiday rentals or let out their own properties will be subject to new rules from next year.
The NSW parliament on Tuesday night passed laws to regulate the growing home-sharing industry.
Part of the package is a new mandatory code of conduct, which will apply to online accommodation platforms including Airbnb, letting agents, hosts and guests from next year.
Under the policy, anyone who commits two serious breaches of the code within two years will be banned for five years and be listed on an exclusion register.
Minister for Better Regulation Matt Kean said the changes were a win-win for hosts and guests.
"It acknowledges the huge financial contribution online booking platforms make to the NSW economy, but also takes a zero-tolerance approach to raucous guest," he said in a statement on Wednesday.
Changes are also being made to laws so that owners' corporations can ban short-term letting in their block if they get a 75 per cent majority vote.
Planning rules will also come into effect next year, limiting how many days a year properties can be rented out.
Airbnb Australia, which has more than 57,000 listings in NSW, said the rules needed to change.
"The NSW government's fair and balanced laws will protect people's rights and support healthy tourism," the company's country manager Sam McDonagh said in a statement.
"We are committed to working collaboratively to implement these new laws."
Rivals HomeAway, which recently acquired Stayz, said while the new legislation provided the sector with some certainty, more needed to be done.
It wants a "robust and simple" registration scheme for home owners who list their properties online.
"Packaged with the mandatory code of conduct, a proper registration system will ensure that home-owners subscribe to the ground rules for listing a property, and will give the wider community more certainty that complaints about noise, over-crowding or anti-social behaviour will be dealt with swiftly and decisively," HomeAway's Eacham Curry said in a statement.
The company has also suggested a new body, mostly funded by industry, to process and adjudicate questions about noise, overcrowding and other issues.
