We call them Granny Flats. This is mostly because they are used to extra living area & space for family members to soften the cost of living. Some councils are now processing applications for Granny Flats, Studios, Bungalows etc, in shorter time frames to allow the structures to be built with less stress. Frame Steel offer a range of designs to cater for most council regulations & provide custom kits.

to aim to stay within budget I suggest keeping the bathroom intact and enclosing the kitchenette to install a vanity and create a wiw, adding a "short" dividing wall to retain some light and air circulation for a windowless bedroom and add a basic kitchen along the wall next to the existing laundry where new plumbing could be concealed inside walls OR, for much more money, convert the garage to a bedroom and wiw, the old laundry to an ensuite bathroom, make a new laundry at the rear of the remaining garage, convert the old bathroom and kitchenette to a more generous kitchen with an island and optional side entry and extra window

simply put - massively pushing the functional envelope in such tight/small limits. To achieve this you have to seriously limit/streamline flow/access points and maximise any wall space. So for example the only window into the kitchen really should be say a splashback window. The double access into the kitchen/living is a luxury in context - something has to give here otherwise you'll end up with something that ticks boxes but in reality is not actually very usable .......recommend you check out some Japanese & northern European work to see how this type of thing can be achieved effectively/cleverly when space is limited....possibly here you may be best to consider a living/kitchen/bedroom setup that is functionally zoned/separated with strategic furniture/joinery placement, simple kitchen at one end and bathroom the only "room" created within existing structure.......remember, depending upon existing conditions and what the ultimately outcome it can sometimes be false economy rearranging/re-using elements when you'll get a better bang for buck by popping out a little here and there to free up certain details for certain functional gains......good luck! PD

@dreamer thanks for your input. Do you mean placing glass sliders nstead of highlights for bed 1 and bed 2? Do you think that would be OK close to boundary? Also where would you place them for furniture placement? What type of door for bathroom privacy? A swing door? Do you agree with @kate to narrow the peninsula bench? Yes, this will be a rental for all ages. We have a very good highschool across the road and many, many.people move into the suburb to be in the catchment for the school. Eventually my parents may live here but that would not be for at least 10 years or so. What do you think of laundry space? I will need to check whether or not you are allowed to do this. Storage and porch areas do not count for internal floor space max at 70m2