What is required to rent out a downstairs flat?

What is required to rent it out? Steps and costs involved in making it a separate dwelling?
It depends on your council’s ruling, but the easy answer is “nothing needs to be done unless you as the landlord are not prepared to pay for the utilities usage (gas/water/electricity). Ideally the downstairs flat would have its own set of bins and its own letterbox, but that will be a flag to council to ponder hitting you with two sets of council rates.”

What would be the cost of installing separate power meter and water meter? Also I assume separate garbage collection?
Regarding power meter and water meter, depends on what your local water company charges for meters, and what your local tradies charge. A quick call to a local electrician and plumber should give you a ballpark answer. Separate garbage collection if you ask council for another set of bins, but remember in doing so they might decide to rate the downstairs flat separately.

Parking requirements- there is one separate carport for the flat.
Bonus.

Would I be able to make some of the interest on the mortgage tax deductible or not?
Yes. However discuss with your accountant to understand the impact to your capital-gains-tax-exemption on your primary residence.

If I renovated the flat would the costs be tax deductible ( given that the mortgage would be covering the whole dwelling)?
Improvements are generally depreciated over time (not immediately claimable like repairs and maintenance can be).

Anything else I haven’t thought of?
Don’t confuse separately renting the downstairs flat with trying to subdivide it onto its own title. If you go down that path then yes, it’ll require its own gas, electricity and water meter. It’ll have to comply with fire ratings so you might have to make alterations to the ceiling (because that is what separates it from upstairs). A local builder could comment on this. Also it’d need its own letterbox and bins, and would have to comply with your local council planning rules. Each “dwelling” would have to have the right amount of parking and private open spaces etc etc.

Great advice JacM!