It's quite tricky.
Section 160 of the Residential Tenancies Act 2010 (NSW) makes it unlawful for a landlord to accept anything other than a bond as security for the failure of a tenant to comply with the lease.
This is usually taken to mean, in simple language that "it's illegal to require a guarantor".
And that's why agents are willing to put another (non-resident's) name on a lease,
and conversely, why so many people sign up as the kind of phantom tenant you are asking about.
It's not strictly correct that you have to live in a place on which you have a residential lease...
For example, a parent can lease a flat for a child (eg while the child is away studying).
Such an arrangement, if disclosed at the start, is not fraudulent.
How much do you know about which database your relative is on,
and how accurate the information is?