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Council's can only enforce that you remove any 'hard-wired cooking appliances'. They cant order you to remove benchtops, microwave, sink etc. Brazen.

Yea, the issue is insurance and liabilities. If someone gets hurt or damages the property you wont be covered. You'd be surprised what CAN be approved. Check this guide out which lists the main requirements etc: http://www.grannyflatapprovals.com.au/tag/garage-conversions Brazen.