Most people can provide some proof. There are always some people who are not good at computer, digital camera, download & upload stuffs. When you come across these people, be prepared and proceed carefully. When you smell something not going well, do not always stuck on one way of communication. Offer partial/full refund with terms, answer emails more promptly, or just talk to them through phone sometimes has better & quicker result.
Buyers can leave you negative feedback but most of them really don't care about this feedback thing, they don't understand how important it is for sellers, they only care about either a good working product or just money. As long as they get what they want, majority of them would be willing to cooperate on the feedback revision thing.
As for the negative feedbacks from competitors, that's another big story. Based on what you said here in this thread, I believe he's not.
It's not late to do something, but don't process refund until buyer and you reach a firm mutual agreement. 49.5 AUD refund is not a big deal if you sell a lot of stuffs like this and if you believe removing this neg will bring you much more profit.   | 
I just sent him a below message:
