The early 1920s were a tough time for the branch mints in Sydney and Melbourne. They were designed and established to strike gold coins; they were suddenly being called upon to make all of Australia's bronze coins, a much tougher metal than gold and required in much larger numbers. As a result, their equipment kept breaking down much faster than it used to. The ongoing breakdowns and technical difficulties eventually forced the Sydney Mint to close, in 1927. But it does mean that coins of this time period are unusually prone to errors.
An "Offset die clash" can happen when the press being used to make the coin comes apart, probably spectacularly while running at full speed. You wouldn't want to have been standing next to the thing when it happened, but standing next to a high-speed modern coining press while it is running at full speed isn't recommended at the best of times, so probably no-one was injured.
What has happened here is the obverse die (or perhaps a broken piece of the obverse die) has come loose, and slammed into the reverse die at an angle, and considerably off-centre. No coin blank was in between the dies when this happened (the coin blank inserting mechanism had probably also failed in the same event), meaning the dies slammed into each other at full power. This has caused the crenellations visible under the EN of PENNY. What you're actually seeing is the edge rim of the obverse (heads side) that has slammed into the centre of the reverse die, damaging it but not breaking it. The obverse die, if it wasn't already broken before the incident, probably would have shattered by the impact. Anyhow, the press would then have been fixed, reassembled with the damaged reverse die, and put back to work. All coins struck afterwards with this damaged die would therefore demonstrate this same damage.
I'm not familiar enough with this specific error coin to know if the other areas you've highlighted are part of the die damage, or if it's just post-mint damage to the coin itself; the rest of the coin's surface looks quite solidly beat-up and scratched. I suspect the large irregular line running down through ONE and HALF is indeed also part of the damaged die, but I think the other areas are just damage to the coin and thus not part of the "mint error".
But this is indeed a "mint error", or rather a "variety" caused by die damage. Congratulations.

Note: while there is much confusion regarding the definitions of "error" and "variety" in Australian numismatics (especially since the late great Ian McConnelly tended to use those terms interchangeably, much to the annoyance of old-school error and variety collectors), the standard definitions are that an "error" is a defect that happens to an individual coin (like a mis-strike, bitten planchet or brockage); "Errors" are thus unique, in that they have occurred to that one specific coin and there isn't going to be another one exactly like it. A "variety" is like what you have here, where damage to the die causes multiple identical copies of the variety to be made. It's kind of like the difference in art between a painting, and a limited-edition print; the painting is unique, but multiple copies of the print exist.
Don't say "infinitely" when you mean "very"; otherwise, you'll have no word left when you want to talk about something really infinite. - C. S. Lewis