" However, my financial advisor has told me that now if payments start showing in my bank account I will have to account for what they are for and where they came from."
You need a new financial advisor.
Where the money goes or stays is 100% irrelevant to the ATO, what matters is that it was received by you - PayPal are registered here as a financial institution and they absolutely feed data to the ATO, just like the banks.
"So now, although I never saw it as a business, even as a hobby I would now have to keep records of everything including receipts for packaging materials, cost of petrol to and from post office etc to minimise any tax liability."
It doesn't matter whether or not you view your own activities as a business. The classification criteria are set by the ATO, not personal feelings. If your activities would be classed as a hobby, it wouldn't matter if you receive the money to PayPal or a bank - if your activities classify you as a business, however, then of course you would need to do all that kind of accounting, no matter where the money goes. PayPal isn't like some kind of a magical Swiss bank account, where you can secretly conduct business and it doesn't matter.
"Similarly they now charge GST on everything from overseas, whether the goods or service require it or not, but how does a private individual go about claiming it back?"
Of course you don't - not even all businesses can. Only GST-registered sellers / businesses can claim the credit on the GST they pay on goods & services (purchased domestically or internationally), and only if it was a business related expense. If you are not running a business as you say, and are not GST registered, you don't need to be thinking about the GST paid on anything you buy.
