A father and son with links to Islamic State have been arrested in Bali, accused of plotting a terrorist attack on the holiday island.

The two men are alleged to have had arrows, bayonets, and an airsoft gun to use in the foiled attack and their arrests come as Australians and Indonesians on Saturday commemorated the 17th anniversary of the 2002 nightclub bombings which killed 200 innocent people, 88 of them Australians.

In the video above: An Australian facing court in Bali says he is "regretful"

Bali police revealed details of the latest plot last night which follows a stabbing attack on Indonesia’s chief security minister, Wrianto, the Coordinating Minister of Political, Legal and Security Affairs, who was stabbed in the stomach on Thursday in Banten province, West Java.

Police have said his attackers, a husband and wife, were members of the outlawed terror group, Jamaah Ansharut Daulah (JAD), which has links to IS.

They say the father and son arrested in Bali are closely linked to the Wiranto attacker and both had pledged allegiance or baiat to the IS leader, Abu Bakar al Baghdadi.

Tourism targets

It is believed their targets may have included villas in Ubud.

Police allege they were members of an extremist WhatsApp group called “Menanti Al Mahdi” and that the father had shared PDFs within the group, including a tutorial on bomb-making, a do-it-yourself submachine gun, 9mm pistol, a guide to making Derringer scrap metal guns and Arab archery techniques. The Wiranto attacker was also a member of the same WhatsApp group.

The father and son, identified as Achmad Taufikkurrahman and his son Zaid Ali Ibrahim, were arrested at 2.35am on Thursday morning in Jembrana, in Bali’s west.

The arrests came ahead of the 17th anniversary of the 2002 Bali bombings that killed 200 people. Credit: NurPhoto / Getty Images

It is understood they were attempting to flee Bali and head back to Malang in East Java. The father was driving when their car was blocked by police. Both he and his son were handcuffed immediately.

Also inside the car were the wife, Etty Umiyati, and two friends of the family.

Bali police spokesperson, Hengky Widjaja, said the men had been arrested by a team from Indonesia’s anti-terror police, Densus 88, and the Bali police counter transnational and organised crime unit.

Interrogation continues

He said the two men, who had been flown to Jakarta, were still being interrogated but it was alleged both had performed a baiat to the IS leader.

Hengky said AT allegedly had a close relationship with the man suspected of stabbing Wiranto.

"AT had prepared arrows, airsoft gun, bayonet that will allegedly be used to do Amaliyah (commit terror acts) in Bali area," Hengky said.

"AT and ZAI are father and son that have planned that if they were arrested they will throw their mobile phones and laptops in the water. From the suspects police have seized evidence namely arrows, an airsoft gun, bayonet, handphone and laptop."

The air gun uses plastic bullets. The exact details of the Bali terror plot or the proposed targets or dates have not been revealed by police, who say interrogations of the suspects are continuing.

7NEWS.com.au understands from sources that the men had conducted surveys of villas in Ubud and these may have been potential targets.

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Neighbours near the boarding house in Denpasar, where the family rented two rooms for the past 18 months, described them as distant.

Neighbours' surprise

The father worked as a welder. Neighbour Agung Yoga said the father Achmad often conducted his welding business until 11pm at night.

"I have never been suspicious at all. I feel shocked when I heard this (the arrest and terror plot)," Mr Agung told 7NEWS.com.au.

He said the family rarely socialised with the neighbours.

Another person was arrested in Bandung and a fourth in Manado in addition to the Bali pair.

Bali Police chief, Petrus Golose, last night confirmed the arrests, saying the job of his agency was to safeguard Bali.

Chevron Right Icon 'I as Bali police chief am the guarantee (of) the safety of tourists.'

"Our task is to make people sleep well. My task as Bali police chief is to make all of you sleep calm. Tourists come to Bali and I as Bali police chief am the guarantor to guarantee the safety of tourists," Petrus said.

Grim history

The last terror attack in Bali was in 2005 when several Bali restaurants were targetted by suicide bombers.

The most deadly attack was in 2002 when suicide bombers hit Paddys Bar and the Sari Club in Central Kuta.

In recent years Indonesian police have thwarted a number of planned attacks with the latest alleged plot testament to the danger posed by terror groups linked to IS and despite IS’s losses in Syria and Iraq.

And in 2018, 23 people were killed in a series of church bombings in Surabaya in East Java, carried out by whole families, including young children who police said were JAD members.

DFAT’s travel advice for Indonesia remained unchanged on Sunday morning at "exercise a high degree of caution".

"We continue to receive information indicating terrorists may be planning attacks in Indonesia. Due to heightened security concerns, staff at the Australian Consulate-General in Surabaya are currently adopting enhanced security measures and limiting their movements.

"Since January 2016, a number of threats have been received by Indonesian authorities from groups purporting to be planning attacks, including in Bali," DFAT’s online travel advice says.

"The terrorist threat level in Indonesia remains high. Attacks could occur anywhere, anytime, including at locations frequented by Westerners."