.htaccess not working with WWW

centOS 7, apache2, mod_rewrite enabled

httpd configuration:

<VirtualHost *:80>
    ServerName domain.com.au
    ServerAlias www.domain.com.au
    CustomLog /home/domain.com.au/logs/access.log common
    DocumentRoot /home/domain.com.au/www
    ErrorLog /home/domain.com.au/logs/error.log
    ServerAdmin nick@domain.com.au

    AddType application/x-httpd-php .php .php3 .php4 .php5 .phtml
    AddType application/x-httpd-php-source .phps

    <Directory /home/domain.com.au/www>
        Options FollowSymLinks
        AllowOverride All
        Require all granted
    </Directory>
</VirtualHost> 

.htaccess works fine if you go without www. What could be the reason?

Thank you.