Parcel is being returned to sender- what's the process?

Hi! So I have an item being sent back and I don't know what the process is. Here's the scenario:

I had a buyer purchase an item from me on the 1st of December. After sending two reminders reminders they paid on the 8th of December. I sent the item off on the 8th of December and do have proof of postage. It arrived to their local post office and was available for pick up on the 23rd of December. On the 31st of December I contacted Australia Post to see what was happening with it as there was no update to the tracking and I wasn't sure if they still had it or if it had been picked up. At first they said it might be lost and to contact the buyer to double check that they didn't have it. I sent the buyer a message on the 31st. Then the buyer replied to my message on the 5th of December saying that they hadn't picked it up yet but would that day, or the next.

On the 5th, Australia Post also came back to me and said that they DO have it. It isn't lost, and they had sent an email and a phone call (left a message) to the buyer telling them to come pick it up. But... You guessed it: they didn't pick it up.

So now as of yesterday afternoon it is being returned.

What's the process for this? Do I have to give the buyer a refund even though it's not my fault that they didn't pick their item up even though they had multiple reminders? As it is, it took so long to get any replies from the buyer and they had from the 23rd of December to pick their items up and didn't. I do realize that this was right in the middle of the holiday period, but still there had to have been some time for her to pick it up as she claimed she would on the 5th or 6th.