Not saying anything in substance that hasn't been said before here, however if we assume from the ABC article that:
(1) the child shown was carried on the a/c and is less than three years old
(2) the aircraft was not engaged in charter or public transport work
and for the sake of the discussion:
(3) the child was not being carried in a bassinet or infant seat
(4) the child was not sick, injured or disabled
(5) the a/c did not have dual controls, or the person occupying the passenger seats were suitably instructed not to interfere with controls etc
(6) the a/c is an Australian registered machine (not being familiar with '23-1600'?)
Without studying the wider body of legislation, here's a decision path showing relevant sections from current
Civil Aviation Order 20.16.3 - Air service operations - Carriage of persons (02/12/2004):
s1
Application
- This section applies to all Australian registered aircraft. (if correct this applies, carry on to the next section)
s2
Definitions
...
- An infant is a passenger who has not reached his or her third birthday. (assumed, therefore applies - note BTW that 'Seats' are
not defined here)
...
s3
Seats
...
- except:
(i) infants, children and stretcher cases carried in accordance with subsections 13 and 14 respectively; and... (an exception to s3, therefore -> s13. s14)
...
s4
Seat belts and safety harnesses
s4.1 ... shall be worn by all persons at the times listed in paragraph 3.1. ... (s3 -> s13 already precludes, but noted here for completeness)
...
s13
Carriage of infants and children (relevant section)
...
s3.2 (1) An infant may be carried in the arms or on the lap of an adult passenger, in a ... (note the comma)
s13.2 (2) When an infant is carried in the arms or on the lap of a passenger in accordance with subparagraph 13.2 (1) the seat belt, when required to be worn, shall be fastened around the passengers carrying or nursing the infant, but not around the infant. (there is no evidence this was not the case)
...
s13.2 (4) An infant must not be carried in an exit seat during take-off or landing unless the pilot in command is satisfied that the infant’s presence in the seat will not obstruct or hinder the escape of other persons from the aircraft.
...
Ipso facto, in the event the above is true
opinio atrium legis de foris on this matter only is that there was was no offence committed per CAO 20.16.3 - not, of course, that a random observation from a rumour network carries any weight or deserves anything other than general derision
