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R40 is good. That means 1m side setbacks not 1.5 :) Every centimetre is your friend :D You might end up with a rear garage (off new secondary) on the truncated block so that the driveway isn't too close to the corner.

Most importantly I would recommend getting your survey done now - every centimetre is going to count with working out the options. $1000 and you know exactly all the areas of the existing house and around it. For a little inspiration there are a few builders who have 10m designs which can look...

Ok. Does this house have a garage on one side? I think you are going to need to knock that down to give you some building space. R30 or R40? I need to note something below in no particular order 1. secondary boundary - you can't build a parapet up to it. So you have your set back...