I agree with JT.
Beware though. If the Lot owner who is planning to renovate his Lot offers to compensate the strata scheme for any additional costs to water usage etc then this may work in their favour at NCAT, and may work against your argument that they are free loading off other Lot owners. The Lot owner concerned would probably be deemed to be acting reasonably in making such an offer.
Why don’t you place conditions on the approval e.g. that the Lot Owner obtains the relevant DA and pays any additional costs that are appropriate for this change of plan?
Unit entitlements can be changed. In NSW unit entitlements are based on the value of a Lot. However, changes to unit entitlements are not automatic and your OC may not be able to change them.