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Currently there is no proof that the people residing in the property are, in fact, illegal immigrants. The tenant has done the wrong thing by not informing of a change in the occupation of the property, but that doesn't automatically mean the others are illegally residing in Australia. I'd get...

I don't see a problem negotiating with the tenant for use of the garage/storage area. Although I do think you're being an a-hole if you think that threatening them is the way to go about it. If you're not happy with how they're currently using the property, issue a NTV.