Countess, as much as many seem to accept Paypal's black snake terms and policies without question.... and seek to convince others that they have no redress (particularly Paypal itself)....you would still have a viable complaint against Paypal for full refund, via BFSO....
Just because Paypal hasn't addressed this type of scenario before (or refuse to)....doesn't mean to say that they shouldn't be addressing it in their policies under our consumer laws. The whole point of BFSO is to determine if said policy is in fact equitable to you as a consumer. If not, then they WILL more than likely recommend that Paypal refund you without you having to go to any further expense. Remember EBS? They refused them too under their so called policies but BFSO didn't agree for some odd reason...protecting consumers again? what a bunch of ratbags eh?
In effect, the seller has voided their responsibility to deliver these goods in an efficient or safe fashion but under Ebay and Paypal's deficient policies, they have no responsibility whatsoever?.
I'm assuming that given cross border issues with consumer rights, you decided to use Paypal with an expectation of consumer protection or safety?
But...now you've learned that Paypal doesn't protect you because here we have yet another loophole they can use to get out of their so called buyer protection obligations?? *Yes Really* If somewhere in their policies, it spells out this scenario specifically and warns consumers that they'll get stitched for massive OS postage costs if they are required to return an item, then I'll stand corrected, but it still wouldn't make it gospel.
Basically, Paypal as the 'go between' in my view, would have a responsibility to refund you, and seek reimbursement from the seller in Italy. This should include postage, because after all...Paypal charge a % of the postage cost included in the purchase price. It shouldn't be ALL your risk when Paypal are telling consumers they are safe using Paypal with OS purchases...CLEARLY...that isn't the case in this type of scenario and hence, it is now a KNOWN risk. If Paypal refuse to address it as a flaw in their so called buyer protection policies...then you have no choice but to take it further in my view.
I would definitely lodge an item not as described dispute with Paypal, then escalate it to their escalations personnel once it is rejected (as Paypal will surely do)...then lodge the BFSO complaint and set out the unfairness to you as a consumer of Paypal, that this hidden trap is not addressed by Paypal in promoting their payment method as the 'safest...detail your expectations of Paypal, given their PR regarding safety....'...cough, splutter, choke.
Remember, you are an Australian Consumer of Paypal, and as such your complaint is against Paypal in as much as their terms allow this type of consumer rip off to occur. That's what BFSO's job is....to examine policies of various APRA licensees and if a systemic issue arises (i.e. if numerous similar complaints are received), then BFSO are obligated to report it to ASIC. It's not a matter of just taking everything Paypal says as gospel...although some would have you believe they are the be all and end all......They're not !!!....and you can only test their dubious buyer protection by challenging it each and every time with BFSO. It's the only watchdog over the top of them and it costs them a sizeable fee when BFSO have to investigate so at least they cop it one way or another.
Remember to go and have a look at BFSO's terms of reference so your complaint matches same.