I'm hopeful that a pro will provide you with some great ideas. Yours looks like some of the "befores" that they do brilliant changes to on the TV reno shows. Most architects will come up with excellent solutions within the space if that's what's required, but nothing worthwhile is likely to be done cheaply though.

Hi Sophie, I immediately agree with the suggestion to remove the angled/chamfered wall to the bedroom entry and create a small lobby, although a good alternative is to consider a straight-run stair and adding a corridor wall to create a 'private' zone - then toilet can stay where it is, tucked in under stair, and privacy (and acoustic/smell separation to the toilet) is created for living and master bedroom. This might mean widening the kitchen room by 100mm or so (noting some reductions mentioned below) and mirroring the bathroom/rumpus arrangement upstairs - it does create a bit more circulation but adds a lovely sense of space when don't have your main circulation through the middle of a room. The laundry pantry is not the usual arrangement - and the distance needed to travel to the linen cupboard is excessive. I would definitely flip the arrangement of laundry /pantry and try to turn the linen into some kind of study nook off the new corridor - and get rid of the tiny desk near the front door!! Imagine that lovely living space with light coming in from the porch which is facing north. That brings up the final comment that north is where the garage is and the main kitchen is therefore south-east facing, this is fine for morning but it is darker for the afternoons. This is a bit harder to change, but the kitchen could be reworked to turn through 90 degrees to face the garden but extend across to the west facade to allow afternoon light in. The nook could be deleted (which blocks afternoon light to deck) and the deck could extend or wrap around the corner for afternoon light. A little corner of deck in the afternoon sun you would never regret! Your draftie designer would need to look at this in detail as the west external wall would might need to shift inwards and south widen into garden, but if afternoon light is important to you then I would encourage you to consider this change too.

Lots of good ideas here. If you do have a carpet remnant overstitched along edges, be sure to specify the thread is to MATCH the colour of carpet. I know this sounds like a no-brainer, BUT we had long and wide carpet runners made up, colour was dark brown. When we unrolled them, low and behold the overstivhers had used WHITE thread. We were stupefied. Who knew one must specify the obvious! Anyway, hubby had a brilliant idea: he used black magic marker and carefully coloured over the white. You would never know it had ever been anything but!

retain the second living area, better resale value as more rooms and you will find it more useful the longer you stay. until the children are in primary school they will want to be in the same living room as you so they will play out in the back living area but over time you will be happy to have a separate play room full of toys you dont have to look at constantly while in the kitchen. I would definetely put both children in 1 room for at least 5 years then you will have another room that could become a third adult sitting/reading area. courtyards let in light and could almost become the second living room, or could turn out to look neglected with dead plants and somewhere you have to sweep up all the time its windy?