Mr Kiad, 25, and Mr al-Kutobi, 24, were arrested on Tuesday afternoon after counter-terrorism police raided the granny flat they share at the back of a property on Riverview Road, Fairfield. Two faces of terrorist suspect Mohammad Kiad. Credit:Facebook Officers found a hunting knife, a machete, a homemade Islamic State flag and a video recording featuring one of the men referring to committing a terrorist attack on Tuesday. The men declined to come into Fairfield Local Court from the cells on Wednesday and will reappear in Central Local Court on Thursday where there is tighter security and a capacity to appear via audiovisual link due to security concerns. Police allege the pair, who worked together as removalists, were planning a gruesome Islamic State terrorist attack from the granny flat as revenge for incidents overseas.

It was not clear where the attack was going to take place or who would be targeted, only that it was going to happen on Tuesday. The granny flat at the rear of the house in Riverview Road, Fairfield. Credit:Daniel Munoz "We believe the men were potentially going to harm somebody, maybe even kill somebody, potentially using [the knife]," Deputy Police Commissioner Catherine Burn said in a briefing to the press. "The intent is clear." NSW Police Deputy Commissoner Catherine Burn and AFP Deputy Commissoner Michael Phelan during a press conference about two men arrested at Fairfield on Tuesday for alleged terrorism offences. Credit:Kate Geraghty

Mr al-Kutobi moved to Australia from Iraq in 2009 and became a citizen in 2013. He was studying nursing and working at a Villawood removalist company. Mr Kiad moved to Australia from Kuwait about four years ago but could not transfer his nursing qualifications. Accused: Mohammad Kiad (left) and Omar al-Kutobi. Credit:Facebook He worked as a security guard before joining the same removalist company, although Fairfax Media understands he was sacked in the past week. A former colleague said Mr Kiad was gentle, nice and never spoke about religion.

Mohammad Kiad. Credit:Facebook "He is quiet, friendly and seemed to be open-minded about religion," said the man, who did not want to be identified. "He seems very quiet at first, but when you get to know him, he is actually a funny person. He never talked about Islam or anything to me." A neighbour who lived in a backyard caravan next door to the men said they appeared to be friendly, but they grew agitated in recent months. Roberto Macatangay told reporters the men were devout Muslims, praying five times a day, but the conversations he had with them gave no indication they held radical views.

However, their behaviour changed recently and they became more reclusive in their granny flat and would be aggressive towards him. "I'm scared that I'm living with these people, " Mr Macatangay told reporters on Wednesday morning. "They seemed to be really nice. They were sarcastic people but I didn't mind that. We used to joke about religion." Commonwealth prosecutor Michael Allnutt said the allegations against the men were so serious that there would be an application that they be dealt with in the NSW Supreme Court – the highest court in NSW that usually deals with murders and very large instances of drug supply or fraud. "It's a very, very serious allegation," Mr Allnutt told Fairfield magistrate Vivien Swain. Islamic State has previously called on Muslims in Western countries to behead any non-believer they can find on the street, particularly police officers and law-enforcement workers.

The alleged terrorist plot was "the type of act ... consistent with messaging coming out of Islamic State", Deputy Commissioner Burn said. The men were not on police or intelligence radars. Counter-terrorism officers only knew about the alleged plot when they received information on Tuesday, forcing them to act immediately in an operation that included police from the Joint Counter Terrorism Team, Sydney, and members of the Tactical Operations Unit. Deputy Commissioner Burn would not say where the information came from. "We received further information that the attack was imminent and we acted," she said.

Searches were also conducted at the residence, as well as of a motor vehicle, and where the men work. Serious problem: Abbott Prime Minister Tony Abbott predicted that the threat of terrorism attacks like the one allegedly foiled in the Sydney raids on Tuesday would get "worse before it gets better". Speaking to the Federal Parliament in Canberra on Wedenesday, Mr Abbott revealed additional details about the video that police allegedly found in the men's possession. He said it was a "video recording of one suspect kneeling in front of the ISIL flag with the two knives whilst making a statement in Arabic".

"This was an imminent attack in Australia inspired by the ISIL or Da'esh death cult," Mr Abbott said. "This is a serious problem and I fear … it will get worse before it gets better. As we have seen again and again in recent times, the death cult is reaching out all around the world including here in Australia. "Regrettably there are people in Australia who are susceptible to these incitements to extremism and even terrorism." - with David Wroe