When you receive the package in the mail, do not open it until you can do so in the presence of credible witnesses (police, JP, Aus Post staff - something more formal / official than a friend or neighbour, anyway). You may even wish to record a video of the package being opened. make sure your witnesses will be agreeable to providing stat decs or other official testimony as to the contents of the package if needed.
Then, contact PayPal by phone, explain that the buyer has returned a different item, advise that you have visual evidence of the contents of teh package, which can be supported by witness testimony, and ask them for an email address to send this evidence if it can not be uploaded to the dispute. You'll also need to provide some kind of evidence of the item that was shipped, so that the difference can be made clear to PayPal.
Make a report about the buyer to ACORN, and / or a police report and provide any evidence of that to PayPal.
If they return the money to the buyer and debit your account for the refund, advise PayPal that you will be taking the matter further with the Financial Ombudsman Service.
Don't panic 🙂 Opening the PayPal dispute was actually the best thing the buyer could have done for you, considering the circumstances, and what they seem to be trying to acheive - PayPal will actually take all of the above into consideration, and if you follow these steps, there is a very good chance that even if the buyer is refunded, PayPal won't debit your account for it. (This is what they did when I had a very similar case a couple of years ago, and I did most of the above).
