I've had clarification on this. Apparently in November changes were passed banning dual occupancies- secondary dwellings are still allowed. If I had lodged an application before November a full house may have been allowable, but no longer. A secondary dwelling may be up to one third the size of the main house, or 60M2- our place is 155m2.
There was also a chance the granny flat may have been disallowed as there are a number of significant trees which have to be removed. There is a possibility this will still be a problem- but also a possibility that I have to plant as many trees as I remove. This was something I would have done anyway, to give screening.
Is this info coming from Council? under the old LEP 1998, your site was zone 2(a) which is single res only, no dual occs and you are near the scenic proctection area. I dont have the latest zoning map for LEP 2012 but I would be surprised if a second dwelling (other than a granny flat) would have been previously allowed but I stand to be corrected. I'm really hapy to help if you need it, particlarly with interpreting what the planners are telling you