Is it safe to bedshare with less than 3 month old using sleep bag with arms in? If arms aren’t in, baby startles and can’t sleep but is this unsafe?

Red Nose recommends that the safest place to sleep baby is in a cot that meets the mandatory Australian standards.  https://rednose.org.au/article/what-do-the-safe-sleep-recommendations-mean

Sharing a sleep surface with a baby can increase the risk of Sudden Unexpected Death in Infancy (SUDI.)                     
A considerable proportion of SUDI occur on a shared sleeping surface.

Research shows us that those babies that are at greatest risk when co-sleeping are:

Babies most at risk of SUDI when sharing a sleep surface are those less than 3 months postnatal age, babies who were born preterm or small for gestational age.
The risks are always much greater if parents smoke or are under the influence of alcohol or drugs (prescription or illegal) that cause sedation and impair their ability to respond to their baby.
There is a very high risk of infant death, including deaths attributed to fatal sleeping accidents, when a baby shares a sofa or couch with an adult during sleep.
https://rednose.org.au/article/is-it-safe-to-sleep-with-my-baby
Red Nose does have some tips on how to reduce risk to baby.
These include:
Dress baby in a safe sleep bag with no hood but with a fitted neck and armholes – don’t wrap or swaddle baby
Make sure your bedding and sheets can’t cover baby’s face
https://rednose.org.au/article/Co-sleeping_with_your_baby

There is an increase risk to baby if they are swaddled & roll, which mostly occurs between 4 to 5 months of age. Swaddling when co-sleeping may contribute to overheating.

You should never co-sleep or lie down holding baby if:

You are overly tired or feel unwell
You or your partner have recently drunk alcohol
You or your partner smoke, even if you don’t smoke in the bedroom
You or your partner have taken any drugs that make you feel sleepy or less aware
Baby is unwell, was premature or is small for their gestational age.