AusBonsai

I've suspected this part of the trunk was dead, but with the recent fungi growing guess this is proof that the wood is rotting.

Should I do anything about it, or just let nature do its thing?

P.S this was the back but turned it around to try and encourage branches

You can do either.
Natural rotting usually makes dead wood look much better than any carving I've ever seen but that will probably take some years to achieve. It's possible the rot will take some wood you'd rather keep for the design.
Allowing dead wood to rot won't usually affect the live parts of the tree.
You can also try your hand at carving the dead trunk then preserving any dead wood that you want to keep.
I'd be interested to see how far the dead extends. In my experience, an entire side of a trunk dead also means the roots below will also have died but occasionally I've been lucky and the roots are still OK.

Thanks Neil. For your reply, but that didn't help! Hahaha. Yes, I'd like to try my hand at carving dead wood but this tree has a much better sense of aesthetics so might let it do its thing.

Regarding the roots, yes, they're in a funny state. A few months ago I tried a kind of ground layer, as it out grew the pot and I wasn't so happy with how high I've left it out of the ground. Wouldn't be surprised to see little roots in this side, if I repot end of winter.