A teenager has been arrested on suspicion of planning to launch an "imminent" lone terror attack in Sydney, Australia.

Australian Federal Police said the 18-year-old, who was known to authorities since last year, was expected to be charged with planning a terror attack.

They said another charge - preparing to enter a foreign country to engage in hostile activities - was expected to be filed in connection with an earlier attempt by the teenager to travel to Syria, after which his passport was cancelled.

If convicted, he could face a maximum sentence of life in prison.

"The planning was occurring now and we would say that an attack was probably imminent," New South Wales Police deputy commissioner Catherine Burn said.

The suspect had been making arrangements to obtain a firearm, Australian Federal Police acting deputy commissioner Neil Gaughan said.

Officials believe he was working alone and his arrest meant there was no longer any threat to public safety linked to the alleged plot, he added.

Australia's government raised the country's terror threat level in 2014 in response to the domestic threat posed by supporters of the Islamic State group.

Police have since conducted dozens of raids they say have been aimed at thwarting multiple terror plots around Australia, including an alleged plan to attack government buildings and a naval base in Sydney.