Thank you all for the advice - it is very much appreciated ;;
We've been to the vet a few times and the dog is not stolen thankfully. And I don't think the previous owner is lying about the dogs getting mixed up because the microchip number they did give us was very similar to his actual microchip number - just off by 3 numbers at the end.
Also he is definitely a German spitz (checked his microchip number on the NSW registry) we don't really mind that he wasn't the breed that was advertised - as it's our bad for not doing more research. I'm going to attempt to contact German spitz breeder and try to track his breeder down. I also wanted to find out who the breeder was so I know what his conditions were before he got to the previous owner.
I've called the local council about the issue - and they've suggested doing a statutory declaration, so I'll try that out.