A western Sydney teenager charged over an Anzac Day terror plot said he wanted to "terrorise" Australians in a text message seized by police, a court has heard.

The 16-year-old boy, who cannot be identified because he is a minor, is charged with preparing or planning to commit a terrorist act by trying to obtain a gun and bomb-making instructions which police allege he was planning to use to target an Anzac Day remembrance service in Sydney.

The Auburn teenager last week pleaded not guilty to the charge and has applied for release on bail at Parramatta Children's Court.

Prosecutor Chris Choi opposed bail, telling the court there was a "sense of urgency" in the teenager's plans.

Teenager represents a 'threat' to the Australian public

The teenager represents an "imminent and direct threat" to the Australian public, the court was told.

Ms Choi read an intercepted text message to the court, in which the boy said he chose April 25 "because here in Australia the kuffar infidels celebrate Anzac Day and I want to terrorise them on that day".

Ms Choi told the court the boy had made "handwritten declarations" calling for sharia law.

The court also heard that on April 16, he allegedly spoke about his plans to a person overseas in an online chat room, saying: "I want to learn how to make a bomb."

When the overseas person asked what mechanical knowledge he had, the boy replied: "I am an electronic apprentice."

The court was also told the boy allegedly downloaded an Islamic State (IS) recruitment video and a video of an IS execution on one of his electronic devices, and that he had allegedly accessed 11 volumes of the jihadist group's magazine Dabiq.

"He was an imminent and direct threat to the Australian public," Ms Choi told the court.

"This material indicates this young person intended to carry out a terrorist act in order to advance the political, religious and ideological causes and beliefs of Islamic State.

"If released on bail, he now has a greater urgency to achieve what he failed to do on Anzac Day and poses a greater risk to the community."

Teen referred to de-radicalisation program in June 2015

The court heard the teenager was referred to a de-radicalisation intervention program in June 2015 after he came to the attention of the NSW Police Joint Counter-Terrorism Team.

The boy was put into an electrical trades apprenticeship and was offered membership in a gym boxing program being run from Auburn's Gallipoli Mosque, as well as advice on maintaining a healthy work-life balance as part of that program.

The court heard the boy had been kept in isolation at the Cobham Juvenile Correction Centre since his arrest on April 24, and that he had been kept in handcuffs until Friday.

The teenager's lawyer Zemarai Khatiz argued for his client to be released into home detention.

"The conditions we are proposing are the most restrictive and stringent conditions possible for any young person," he said.

The boy's father took the stand and wept as he told the court he would give anything to get his son home.

"I would do anything, sleep in the same bed as him, quit my job, do whatever I need to do, he's everything to me," he told the court.

The boy's family has also offered their home valued at more than $1 million as surety for the boy's release on bail, and the court heard the boy's mother has quit her job so she can supervise her son 24 hours a day.

Magistrate Christine Haskett reserved her decision on the boy's bail until Thursday.

The boy's mother, father and sister all wept as the 16-year-old was brought onto the video screen in the courtroom.