Police are dropping terrorism charges against a NSW University student who was accused of plotting to assassinate Australian politicians, with the lawyer for the Sri Lankan national threatening legal action against the police.

Key points: The terror charges were dropped after the Sri Lankan national spent four weeks in jail

The terror charges were dropped after the Sri Lankan national spent four weeks in jail The alleged list of targets also included Bronwyn Bishop and the Sydney Opera House

The alleged list of targets also included Bronwyn Bishop and the Sydney Opera House His lawyers claimed from the outset the case against Mr Nizamdeen was "very weak"

Mohamed Kamer Nizamdeen, 25, was arrested in August and accused of writing in a notebook about plans to kill former prime minister Malcolm Turnbull and his former deputy Julie Bishop.

He was released on bail last month after prosecutors conceded a handwriting expert could not prove he had written the notes in the notebook.

Police on Friday dropped the charge of collecting or making documents likely to facilitate terrorist acts after "definitive advice" on the handwriting in the notebook was received on Thursday.

Speaking outside court on Friday, Mr Nizamdeen's lawyer Moustafa Kheir said the process had taken a toll on the student, who spent a month in a maximum-security prison after being charged.

"What authorities have done to this young man is absolutely unforgivable," he said.

"He's gone through super max jail — unforgivable circumstances."

Police had alleged Mr Nizamdeen possessed a blueprint to target several "symbolic" Sydney locations, after officers from NSW's Joint Counter-Terrorism Team (JCTT) arrested him at Kensington, in Sydney's south-east in August.

Police had alleged the blueprints were found in a notebook in a desk that Mr Nizamdeen used at the University of NSW.

Sydney Opera House was one of the sites allegedly targeted in the notebook. ( Billy Cooper: ABC news )

His arrest and time in jail sparked protests in his Sri Lankan hometown as well as concerns from classmates at The University of NSW.

Mr Kheir said Mr Nizamdeen would be suing the police for compensation.

"We are seeking justice through every avenue we can," he said.

Speaking on Friday, NSW Police Counter-Terrorism Assistant Commissioner Michael Willing declined to comment on the legal threat, calling it a matter for Mr Nizamdeen's lawyers and family.

He also declined to apologise to the family.

"The investigation is ongoing," he said.

"We're relying on forensic analysis of material. We are looking at of whole raft of lines of inquiry at the moment, and these things take time."

Speaking after questions on Mr Nizamdeen's month-long stint in jail, Assistant Commissioner Willing said the "very nature" of terrorism threats meant his department often had to "act first".

"There were serious threats," he said.

"[And] we can never be complacent because the terrorist threat in Australia and NSW is very, very real."

In a statement, police said the investigation had shifted to focus "on the possibility that the content of the notebook has been created by other people".

"The JCTT acted in good faith on the evidence available at all stages of the investigation," the statement said.

"The investigation into the circumstances of this matter remains ongoing, but there is no information to indicate that there is a current threat to community safety."

'Always innocent'

Mr Nizamdeen's uncle Faiszer Musthapha is the Sri Lankan Sports and Local Government Minister, and last month told the ABC last month he believed his nephew was innocent.

Sri Lankan MP Faiszer Musthapha always claimed his nephew was innocent. ( Supplied )

Last month during his bail hearing, prosecutor Christina Choi told the Central Local Court in Sydney evidence for the charge had been "significantly weakened" after a conclusive expert opinion suggesting the defendant was the relevant author could not be found.

Mr Nizamdeen's lawyer said police had conducted eight hours of interviews with the student which also did not uncover anything against the suspect.

"Let's be clear, Mr Nizamdeen today was granted bail because the case against him is extremely weak, almost non-existent," his lawyer Moustafa Kheir said during the hearing last month.

The court also heard other material belonging to Mr Nizamdeen — such as his computer, mobile phone and other documents — did not show any extremist ideology.