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The fact that he's underage technically means he's not allowed to have a paypal account in the first place.
To have a paypal account ,you have to be able to fulfil legally binding contracts.
If you have PROOF he's underage, then PayPal has clearly not fulfilled due care in ensuring that a user is able to conduct lawful business, and that's osmething you can take legal action against PayPal for itself.
From what I understand, PayPal also has to conduct business by Australian banking regulations for all of its operations in Australia. Therefore, you're probably able to take them to your consumer affairs department (ACCC?) and demand restitution and action against this individual.
That said, you also should have practiced due diligence and not done business with a teenager. That's just asking for trouble.
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