A Daesh commander handled a group of Australians, who built a bomb destined for an Etihad Airways flight out of Sydney, officials say.
An Australian man sent his unsuspecting brother to Sydney airport to catch an Etihad Airways flight carrying a home-made bomb disguised as a meat mincer built at the direction of a senior Daesh commander, police said on Friday.
Police said two men who have been charged with terror-related offences also planned to build a device to release poisonous gas in a public area.
High-grade military explosives used to build the bomb were sent by air cargo from Turkey as part of a sophisticated plot "inspired and directed" by Daesh, Australian Federal Police Deputy Commissioner National Security Michael Phelan said.
He said that the plot targeted an Etihad Airways flight on July 15 but that the bomb never made it past airport security.
"This is one of the most sophisticated plots that has ever been attempted on Australian soil," Phelan said.
Police arrested four men last weekend in raids across Sydney, Australia's biggest city. One man has been released, while another is still being held without charge under special counter-terror laws.
Domestic media have identified the two men who have been charged as Khaled Khayat and Mahmoud Khayat, who each face two counts of planning a terrorist act. The charges carry a maximum punishment of life in prison.
The men did not apply for bail at a court hearing on Friday, a spokeswoman for New South Wales Courts said, and bail was formally denied. Their next scheduled court appearance is on November 14.
Preparation of "fully functioning IED"
Police allege that one of the two men charged late on Thursday had been introduced to Daesh by his brother, who they said was a senior member of the group in Syria.
Communication between the accused man and Daesh began around April. Under the instruction of the unidentified Daesh commander, the men built a "fully functioning IED" or improvised explosive device.
One of the arrested men's brother was unaware that he was carrying a bomb, disguised as a commercial meat mincer, in his luggage, and tried to check it in at the airport, police said.
"We'll be alleging that the person who was to carry the IED on the plane had no idea they were going to be carrying an IED," Phelan said.
There was "a little bit of conjecture" about what happened next, he said, but it appeared one of the accused then left the airport, taking the luggage with him. The man's brother boarded the plane and has not since returned to Australia.
Etihad said in a statement on Friday it had been working closely with the Australian Federal Police investigation.
Plot to build a chemical bomb
Police also said they had uncovered the early stages of a plot to build an "improvised chemical dispersion device" designed to release hydrogen sulphide gas. Precursor chemicals and other components were found but the accused were "a long way" from making a functioning device.
Foul-smelling hydrogen sulphide, or "rotten egg gas", is deadly in high concentrations.
Police said "preliminary and hypothetical" discussions between the accused and Daesh suggested a plan to deploy it in a crowded place, such as public transport.
Australia, a staunch US ally that has sent troops to Afghanistan and Iraq, has been on heightened alert since 2014 for attacks by home-grown militants returning from fighting in the Middle East, or their supporters.
While there have been several "lone wolf" attacks, officials say 13 significant plots have been foiled in that time.