I have been in Thailand for 7 years and previously was using the 65,000 baht per month but my mother died in December 2018 and I, along with my 6 year old son had to fly back to Australia on 2 occasions to finalise her funeral arrangements and her estate, so for the past 4 months the money was not transferred to a Thai bank account. I was hoping that the money from her estate would be here earlier in March but it arrived in my Thai bank account on 8 May 19 and my pending Retirement Visa renewal is on 18 Jun 19. 

I went into Kanchanaburi Immigration to show them the bank book with 1m baht in a term deposit for 12 months and they said it could not be considered as it was not in for the mandatory 2 months prior to my renewal. I asked if I could get a 3 months extension to my current Retirement Visa so that it would then be in the bank for more than the 2 months, they refused. They told me I would have to go back to Australia to apply again for another Retirement Visa. This would mean I would have to take my son out of school disrupting his education and go through the whole process again.

Is there any thoughts on how I could solve this issue without having to go back to Australia. Thanks

You can try applying for a 90-day Non-Immigrant O visa at a Thai Embassy or Consulate in a neighboring country.  If you are married to a Thai or the parent of a Thai, you can apply for an O visa on that basis also.

If you son or wife is Thai you can apply for a 60 day extension to visit them. Then apply for the one year extension near the end of it.