They have 60 days to register his birth, so they have a bit of time up their sleeve to seek the proper legal advice before registering it because it will be much easier in the long run to get it right the first time than to change it later and I think they owe it to their son to do the right thing and not hide it like it is something to be ashamed of. If it takes a little time to get all the legal advice sorted out before they can apply for centrelink money she will still be back paid so she wont lose out, but she will just have to wait for it. I assume that her parents were supporting her up to this point anyway considering her age so surely they can support both of them now just for that litle bit longer till this is all sorted. Plus your brother is making every effort to help too which is great.
And yes, like Tashybabe said you just can't run the risk of doing it that way and then being dobbed in because the penalities are quite harsh and that's the last thing they need to deal with.
But most of all just make sure that they know you have their back and will help them sort it out because I can only imagine how she must be feeling to have copped what she did from the staffer at c'link and be told all sorts of things that would make her feel like she's done something really terrible kwim?

