As a seller am I obligated to give a refund for an auctioned item if it is damaged in the post?

I have a buyer that won an auctioned item that was brand new and in perfect condition.  The buyer now wants a full refund because the item was damaged while in transit with Aust Post.  I am a private seller.

 

1. Am i obligated to give a refund?

2. If so, is the refund for the cost of the item only?

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