Hi Spooky Luke,
If money changes hands, then you become a professional and it is deemed a business. If you are not earning money or reward, then it is teaching a friend and you or the council cannot be help liable for injury or damages. Even a hobby business (earning less than $50K) is still a professional business and requires an ABN and to abide by the law. So the short answer is, YES, IT IS ILLEGAL.
You do not have to be an IKO instructor to be a professional, but as you use public land and public waterways, then you need a "Trading in public places license" and also any additional permits for specific lands you use as deemed necessary by local council or waterways or CALM or whatever government body holds rights to govern business use of the waters or public lands you use.
To be able to get these permits you must show a certain level of accreditation to a recognised standard to council and then produce Insurance for $10,000,000 for Public Liability and Professional Indemnity, indemnifying the school and council.
You will not get insurance without an accreditation such as IKO. As IKO has been around the longest and is the only globally recognised standard, it happens to be them that councils want you to be accredited by.
Yes it is a royal pain in the arse to get the permits, and yes, dealing with councils and government agencies can be massively time consuming and painful, not to mention expensive, but to be legal, you gotta do it!
I hope this answers your question,
Good winds,