Mohamed Kamer Nilar Nizamdeen was arrested by anti-terrorist agents at the University of New South Wales in Kensington on Thursday.
There followed a notice from a university worker, who police said found a notebook that allegedly named various places and individuals as "possible targets."
ABC, citing a police source, reported that former Prime Minister Malcolm Turnbull and former Foreign Minister Julie Bishop were among the targets.
The police of New South Wales have not confirmed the report.
Several other electronic items were also seized during a raid on the Zetland unit early on Friday morning.
The 25-year-old was accused of compiling or making a document that is related to the preparation, participation of a person or assistance in a terrorist act.
"The charges brought against this person are serious and significant, and should not be underestimated," said the superintendent of the Australian Federal Police, Michael McTiernan.
Nizamdeen is in Australia with a student visa that expires in September.
He was employed as a contractor at the University of New South Wales and allegedly traveled to Sri Lanka and other areas.
Nizamdeen was not known to the police and has no criminal record in Australia, police said.
The authorities insist that there was no concern for public safety.
The University of NSW said that the safety and wellbeing of staff and students on campus was their top priority.
"We will continue to help the police with their investigations and acting according to the advice of the police of New South Wales," a spokeswoman told AAP.
The case was briefly mentioned in the Waverley Local Court on Friday. Nizamdeen did not apply for bail and was formally rejected.
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