The six-year-old does not qualify to be considered a "terror victim" and will therefore not receive compensation, Lieberman said on Sunday in a written response to a question by MK Yousef Jabareen of the Arab Joint List, according to the Palestine News Network.
Under the current law, the state must compensate Israeli citizens affected by terrorism, but this does not apply to Palestinians "who are not citizens or residents of Israel", Lieberman wrote.
"We have not found in our records a specific request [to receive compensation despite not being considered a terror victim]," the letter adds.
In 2015, an arson attack on the Dawabsheh family home in the village of Duma in Samariai killed 18-month-old Ali Saad Dawabsheh and his parents.
The only survivor of the attack from the immediate family was Ahmed Dawabsheh, who was orphaned and left badly injured in the attack.
Israeli Prime Minister Binyamin Netanyahu visited the injured family members in the hospital after the attack and told the PA that they would be compensated.
The incident sparked an international outcry, leading to a deeper investigation by Israeli authorities into hate crimes related to Jewish extremism.
One of the settlers who was involved in the attack was released in June last year after serving only 10 months in detention.
Meir Ettinger is the grandson of US-born Rabbi Meir Kahane, Israel's most notorious Jewish extremist, whose ultranationalist party was banned from Israel's parliament for its racist views in 1988. He was assassinated by an Arab gunman in New York in 1990.
The 24-year-old extremist has been accused of heading an extremist movement seeking to bring about religious "redemption" through attacks on Christian sites and Palestinian property.
However, he has previously denied on his blog the existence of an underground Jewish organisation, but has defended attacks on "crimes" such as the existence of churches and mosques branded as "places of pagan worship".
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