"Upgrade Declined" is normal; It is part of the standard processing.
Look your booking up at
www.checkmytrip.com; you should see the segment entry for the original booked class. As well, a waitlisted <upgrade> class segment for the same flight will show.
If your upgrade comes through, this will become
confirmed and the segment entry with the original booked class will disappear. At which point in time
www.qantas.com.au/yourbooking will show as confirmed.
It appears that Qantas.com is fudged so that when a waitlisted <Upgrade Class> segment and a confirmed lower class original segment exist on the same PNR for the same flight it will show online as "Declined".
If the upgrade does not come through, the waitlisted <Upgrade Class> record will stay there until the PNR is completed ... and the upgrade for that segment will always show declined ...