A man has appeared in a Sydney court charged with conspiracy to prepare for a terrorist attack on Australian soil.
Omarjan Azari, 22, was one of 15 people detained during a large counter-terrorism operation in Sydney and Brisbane this morning.
The Commonwealth prosecutor Michael Allnutt told the court the planned offence was clearly designed to shock, horrify and terrify the community.
The ABC reports a plot to behead a random member of the public in Sydney on camera was discovered through the interception of a phone call.
Court documents are expected to reveal the raids were aimed at a terrorist cell and a plan that involved snatching a random member of the public in Sydney, draping them in an Islamic State flag and beheading them on camera.
Omarjan Azari did not apply for bail and the case was adjourned until 13 November.
IS member 'directing networks'
Australian Prime Minister Tony Abbott said intelligence reports suggested an Australian member of IS was directing networks back in Australia to perform "demonstration killings".
More than 800 officers were involved in the large-scale raids as part of Operation Appleby in suburbs across Sydney's west and north-west, with an unknown number of police involved in raids in Brisbane's south-east.
The operation was launched jointly by New South Wales officers, Australian Federal Police and the Australian Security Intelligence Organisation.
A series of search warrants were executed in the suburbs of Beecroft, Bellavista, Guildford, Merrylands, Northmead, Wentworthville, Marsfield, Westmead, Castle Hill, Revesby, Bass Hill and Regents Park.
Similar raids took place in Brisbane, with officers conducting searches on properties at Creek Road in Mt Gravatt East, as well as Logan and Underwood.
Police said it was too early to say if anyone had been arrested in Brisbane.
Queensland Premier Campbell Newman declined to comment, saying it was an operational matter.
ABC reporter Lucy Carter said part of Bursill Street in Guildford was blocked off by police, as a home was raided.
She said police with sniffer dogs had been questioning a number of people on the front balcony of a single-storey home before they began removing items including computers..
Neighbours said the occupants had only lived in the house for about three weeks.
A resident of Bursill Street, who wished to remain anonymous, has been trying to come to terms with the raids.
"I just find it so wrong for that to be happening here in Australia. How do we get to this stage that people are this out of control?" he said.
"You talk about the money going overseas - earlier this morning I heard $A18 million or $A20 million going overseas, and we don't know about it until it's too late."
Punched by officer
One man who was at one of the raided properties when police arrived claims to have been punched by an officer.
Maywand Osman, who was detained during the raids but not arrested, said: "I opened the door this morning at 4:45am to about four police officers.
"They asked me to raise my hands. I immediately raised my hands. Four officers then jumped at me and one punched me in the face.
"They threw me to the ground and started hitting me in the head and pulling my hair.
"One officer grabbed me by the hair and said 'you piece of shit'. While they were beating me I heard one officer say 'just don't make him bleed'.
"They then went inside my house to conduct a search. They found nothing in my house and I was not under arrest or in custody at any point in time."
A statement released by Mr Osman's solicitor said: "My client was brutally attacked by four police officers this morning without provocation."
"He sustained injuries to the face and head. He was escorted to hospital by ambulance."
Australian troops part of combat mission
Meanwhile the head of the Australian Defence Force Air Vice Marshal Mark Binskin said RAAF fighter jets would be part of a combat mission in the Middle East.
The defence chief said calling the mission a war would give Islamic State extremists too much legitimacy, but the counter-terrorism mission is considered to be a war-like engagement.
He said initially they would be involved in reconnaissance, but then looking to do strike missions and work in an advisory role and support the Iraqi army.
Two hundred special forces troops - mostly commandos - have already shipped out and are waiting in the United Arab Emirates for a government decision on deployments.