Hard to coment with out seeing the before and potential after but my money would be on the kitchen and bathroom especially if the wall is sound as is. 

Do it anyway as no harm done if you never convert to an IP and much if you do!

Just looked at the statemant and looks like it is already an IP as rent payments are recorded? 

Not sure what the rules are in your state (Im in WA) but you would be able to strata into three seperate titles and each would be treated as a seperate property.

You could sell either of the three titled blocks as land only, land with building approval and plans or as a house and land package on completion.

The banks would view each property as a seperate property and would be worth more therfore could borrow more overall. 

Finance would be available but would be advisable to run the future plans with potential lenders given they are dual occupancy with a party wall before expending time and $$$ on building plans and subdivision. 

Can the land be split into 6 strata blocks?

If so could look at doing a strata/build rather than a build/strata since you have the cash to do this without extra finance required. 

Any reason why you dont move the 60k from the IP offset to join the 200k in the PPOR offset therefore minimising interest payments that are non deductable and maximising deductable debt on the IP? I dont think paying down your IP debt with the 60k in the offset is a good move based on the informtion disclosed thus far. 

As Terryw stated best to get advice from an acountant/tax agent or lawyer before proceeding on advice from a broker to avoid a world of pain down the track. 

The Dark Knight wrote:

Offset could be my partner <3 i do the same as Jamie all rent/salary goes in and just use a credit card and repay before the interest kicks in

Clean, simple and effective and fingers and toes crossed the banks dont meddle with offsets down the track. 

Thier are restirctions in place in regards to modifications to properties purchased with SMSFs.

Best to seek expert advice on anything outside of repairs and maintmenace to an SMSF property utilising an LRBA.

To true and well said. I have clients in neighboring suburbs and we rarely meet face to face unless its an invite to a social gathering

Skype is a great tool for overcoming the reluctance to use someone you have never seen in the flesh as well. 

Each to their own but both methods can work equally well. 

Leave it where it is.

Its tax free and a flexible option as your circumstances change.

For example if you purchase a PPOR you could repeat the strategy and park in the offset connected to the PPOR. 

Same is happening in WA.

A number of clients and friends in high paying professional positions have either been made redundant or have concerns its looming.