Using my Time capsule to improve WiFi from my network supplied modem
It is certainly possible to set up your Time Capsule as your sole router even when your modem is a router/modem combo.

Setup

Part 1: setting up the Time Capsule normally


Download Airport Utility on your Mac (if you already have downloaded it, ensure it's version 5.3 or later).
Connect your Telstra modem to the WAN port of your Time Capsule via an Ethernet cable.
Connect the Time Capsule's power cable to an AC outlet.
Open the Airport Utility app on your Mac (search Spotlight for it or go to the Utilities subfolder of your Applications folder).
The Time Capsule will have an initial name (such as "Time Capsule fea88c"). Click continue to proceed.
Select "Create a new wireless network" and click Continue.
Follow the rest of the on-screen instructions (you'll probably want to use the same SSID/Password for your new network as your old one had). When finished, your Time Capsule will restart and apply your settings.


Now your Time Capsule is broadcasting WiFi. Problem is, so is your Telstra router/modem.

Part 2: turning off the router portion of the Telstra.


Find your Telstra router's local IP address (this page might help). NOTE: It is probably 10.0.0.138, but may also be 192.168.0.1 (or something else even!).
Type this IP address into your browser's address bar.
You should see a setup page for your Telstra router/modem (if you don't, you have the wrong IP address from step 8).
Find the WI-FI section: 
In the WI-FI section, navigate to both the 2.4 GHz and 5 GHz tabs, and in each uncheck Enabled. 
Test that you successfully disabled your Telstra modem/router's routing capabilities by unplugging the Time Capsule. If your internet connection drops, and your devices go offline, you're all set.
Plug your Time Capsule back in and enjoy.




Your sole router should now be the Time Capsule. If any step goes wrong, feel free to leave a comment below so I can assist you further. Thanks!



Sources and more information


Setting up Time Capsule normally, an Apple Support article.
Accessing Telstra router settings, a Telstra forum.
Turning off WiFi broadcasting of a Telstra router, a Telstra forum.