I modified the Austpost Improved Module so that when using free shipping it gives regular post parcel rate for free, and subtracts that rate (including handling fees & properly displaying the modified ones) from the other option (i.e. Express or 3kg Satchel.) When not using free shipping it works normally.

This took a LOT of work. I will share this if requested. I did a quick once through with the letters but since I don't ship any I didn't thoroughly check it. I will if I get a good enough request.