FAQ 9: What if I take an existing image and alter it so much that it is barely recognisable: do I still need to get permission?
Copyright will be infringed where a "substantial" part of the work is reproduced in a material form. "Substantial" is not defined in the Copyright Act, but case law and best practice interpretation suggests it relates to the both the quality and quantity of the amount copied. It is likely to take into account similarities between the two works. Where the work you create can be recognisably derived from another image, it would be sensible to get permission. In addition to infringing copyright, altering someone else's work might constitute an infringement of the creator's moral rights, specifically the right of a creator not to have their work subjected to derogatory treatment.