SYDNEY (AFP) - The police and a prayer hall were among potential targets for attack uncovered by the police investigating two alleged terrorists seized in Sydney with an Islamic State in Iraq and Syria (ISIS) flag this week, the Australian police said on Friday.

Officers said on Wednesday they had thwarted an imminent terror attack which was "consistent with the messaging coming out of ISIS" when they arrested Omar Al-Kutobi and Mohammad Kiad in a raid in western Sydney.

Counter-terrorism investigators have since been dispatched overseas, Australian Federal Police and their New South Wales counterparts said on Friday, without detailing where they have been sent. "As a consequence of those ongoing investigations, further information obtained has indicated a number of targets on Australian soil," they said. "Those investigations have verified information that there were threats to police and also a prayer hall in Sydney."

The police said there was no specified threat to a police facility or officer while counter-terrorism officers confirmed the proposed threat to the prayer hall had been abandoned.

Al-Kutobi and Kiad, arrested in a raid by the Joint Counter Terrorism Taskforce after a tip-off, have been charged with making preparations for a terrorist act.

An ISIS flag, a machete, a hunting knife and an Arabic-language video detailing the apparent plot were also seized in the raid, police said.

Prime Minister Tony Abbott told Parliament this week that the video allegedly showed one suspect kneeling in front of an ISIS flag, with a knife and machete, threatening to undertake violent acts.

"He went on to say... 'I swear to almighty Allah, blonde people, there is no room for blame between you and us. We only are you, stabbing the kidneys and striking the necks'," Mr Abbott said.

The two accused, who are reportedly devout Muslims, are expected to apply for bail next month, the Australian Associated Press said.

In September, Australia raised its terror threat level and carried out extensive raids in Sydney and Brisbane to disrupt an alleged plot by IS supporters to abduct and behead a random member of the public.

Three months later a self-styled Muslim cleric, Man Haron Monis, took 17 people hostage for some 16 hours at a cafe in Sydney.

The stand-off ended after he shot dead cafe manager Tori Johnson, prompting the police to storm the building and kill him. Another hostage died from a stray police bullet, or bullet fragments.