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A man has been arrested by counter-terrorism police for allegedly plotting a New Year's Eve terror attack in Melbourne.

"It is now questioned for the preparation of a terrorist act and to have collected documents to facilitate a terrorist act", one can read in a statement obtained by ABC News.

He had connections with terrorists and he would become "energized" online when learning of overseas terrorist attacks, Patton said.

Officials said Ali Khalif Shire Ali, an Australian national with Somali parents, was arrested by Victoria State police Monday in the Melbourne suburb of Werribee.

Patton said the purported plan included firing into crowds during New Year's Eve festivities at Melbourne's Federation Square.

Speaking at a press conference, Victoria's deputy police commissioner Shane Patton said the man could appear in court later today or tomorrow.

It was not linked to any other operation, added the police.

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The practising Muslim was born in Australia, is an Australian citizen and his parents were from Somalia, Mr Patton said. One of the charges he is facing carries a penalty of life in prison.

Australian police have charged 74 people in counter-terrorism investigations since 2014, when the nation's terror threat level was raised to "probable".

The man worked part-time at a computer fix business and police raided the facility.

Police said they believe Ali acted alone and do not expect more arrests.

Police in Australia foiled a plot to commit mass murder on New Year's Eve in one of Melbourne's most popular areas to ring in the new year.

IEDs in Melbourne, Aug 2016: Counterterrorism police disrupt an alleged domestic terrorist attack in Melbourne, potentially involving improvised explosive devices.

The police had kept a close eye on Ali's actions between the months of March and June and found that the college student downloaded instructions from an al-Qaida in the Arabian Peninsula website on how to launch a terrorist attack and how to use guns.


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