Granny flat for parents

Hi all,

My parents live in rural WA. As they are requiring more and more health care, my sisters are becoming worried about them and as such they are going to move closer to the family.
The house where they are living is not really worth a great deal so they were looking at moving into a "lifestyle village". (really just a park home village with lots of facilities.)
My question is this.

I have a large block of land that I am building my PPOR on and was thinking of building a granny flat for my parents with the money they get from the sale of their house in the country. Is it possible to borrow the money to build the Granny flat and keep the cash in an offset account so this is effectively not adding to the cost of the loan?

Is this allowed?

Can anybody think of any other bright Ideas.

I would really hate for my parents to be stuck in one of those retirement places.

Thanks

Mark