I would have DS call Fairwork and alert them to this - it is illegal!
Definitely report them! When my DH was returning to the workforce after being on centrelink benefits (mind you a loooong time ago) he did this jobstart thing & the people he was working for treated him terribly. He complained to centrelink & that employer was not allowed to use the jobstart thing anymore.....

I feel for your DS. I hope he can get some other work very soon