A 39-year-old man has been charged in western Sydney as part of an investigation into a notebook allegedly outlining plans to kill senior politicians that led to the wrongful imprisonment of a UNSW employee.

Key points: Arsalan Khawaja is not accused of intending to carry out the attack, but of framing a colleague

Arsalan Khawaja is not accused of intending to carry out the attack, but of framing a colleague The list allegedly included potential targets including the Sydney Opera House and Harbour Bridge

The list allegedly included potential targets including the Sydney Opera House and Harbour Bridge Police dropped charges against Mohamed Nizamdeen after a handwriting expert could not prove he penned the material

NSW Police detained Arsalan Khawaja, the brother of Test cricket star Usman Khawaja, over the alleged terror hit list, which was found in an office in the same building as the university's library earlier this year.

The book contained plans to kill the former prime minister Malcolm Turnbull, his then-deputy Julie Bishop and former speaker Bronwyn Bishop, as well as a blueprint to target train stations and Sydney landmarks such as the Opera House and the Harbour Bridge.

He has been charged with perverting the course of justice and forgery making a document.

When he appeared in court this afternoon, he did not say anything but listened attentively from the dock, dressed in a white open-necked shirt.

He was granted bail on condition that he surrenders his passport, does not go within 100 metres of the University of New South Wales and does not contact colleagues in the university IT department.

He is also required to post a surety of $50,000 in cash.

The ABC understands the allegation against Arsalan Khawaja is not that he intended to carry out a terror attack, but that he framed his colleague, 25-year-old Mohamed Nizamdeen.

It is understood he was motivated by jealousy over Mr Nizamdeen's friendship with a woman and his success at the university.

Mr Nizamdeen spent a night in solitary confinement at Goulburn supermax jail — and then was transferred to another facility — before he was released when terrorism charges were dropped against him in October.

He strenuously denied any involvement and is now planning to sue police, previously describing the investigation as "immature, embarrassing and biased".

Mohamed Nizamdeen, who slammed the NSW Police investigation after charges against him were dropped. ( Facebook )

NSW Police Assistant Commissioner Mick Willing said police "regretted the circumstances" which led to Mr Nizamdeen being charged and spending over a month in custody.

"What we will be alleging is that he was set up in a planned and calculated manner, motivated, in part, by a personal grievance," Mr Willing said.

A handwriting expert failed to prove Mr Nizamdeen had actually written the plans, but police have refused to apologise for the bungled investigation.

Mr Willing stood by the actions of investigators.

"We can never be complacent, because the terrorist threat in this country continues to be very real, and the very nature of these offences often means that we need to intervene early," he said.

When asked again whether he would apologise, Mr Willing said he was "limited" in what he could say due to current and potential legal proceedings.

Police have offered to pay for Mr Nizamdeen's court costs, but Mr Willing would not say if they would pay further compensation.

"We'll have to wait for that to play out," he said.

Sorry, this video has expired NSW police 'regret' charging Khawaja colleague over terror hit list

Mr Nizamdeen was completing a PHD and working as a business analyst at the UNSW IT department at the time of this arrest.

Speaking from his hometown of Colombo in Sri Lanka in November, Mr Nizamdeen said he would not be returning to Australia because "the whole saga has clearly ruined my future".

"I am completely exonerated, and I hope the media and the Sri Lankan public can help me pick up the pieces of my shattered life," he said.

AFP Assistant Commissioner Ian McCartney described the investigation as "quite unique".

"It's had complexities," he said.

"But we stand by the investigators and the decision they made at the time to arrest Mr Nizamdeen in relation to these issues."

Mr Willing said police were reviewing their handling of the matter.

"Really, the person who is responsible for what occurred to him is the person we're alleging manufactured this document," he said.

Speaking at Adelaide Oval, Usman Khawaja said it was a matter for police.

"Out of respect for the process it would be inappropriate for me to make any further comment," he said.

"I just ask for you to please respect my privacy and my family's privacy at this time."