Usage of land is defined by the zoning of the land. The local environment plan will define permissable and prohibited uses. Intensive animal industries are generally not allowed in residential zoned land. State Environmental Planning Policy defines intensive animal industries according to the method of containing and feeding animals as opposed to the number kept. Basically you are not legally allowed to breed rodents in a residential premise, although it obviously happens. The main thing is to avoid suspicion. If there is a complaint and you go to court, my guess is a rodent breeder would lose.
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http://www.legislation.nsw.gov.au/maintop/view/inforce/epi+540+2010+cd+0+N
Here's a link to the allowable uses in Penrith LEP which confirms that rodent breeding is prohibited.