Lawyers for a Melbourne teenager who was allegedly one of two men behind an Anzac Day plot to run down a police officer, behead them and steal their weapon for a suicidal rampage want him released from custody so he can be counselled.

Harun Causevic,18, was arrested with four others during a counter-terrorism operation last month and charged with conspiracy to commit acts done in preparation for, or planning a terrorism act.

A bail hearing is underway at the Melbourne Magistrate's Court.

Causevic's lawyer Michael O'Connell told the court the case against him was "far more limited" than allegations against his co-accused Sevdet Ramden Besim.

Besim, 18 of Hallam, who was also arrested in the raids, withdrew his bail application last week.

Prosecutor Andrew Doyle, who was opposing bail, told the court Causevic, of Hampton Park, was a flight risk and remained a danger to the public.

Police alleged both teenagers were trying to get passports and that Besim had contact details for people with links to Islamic State in Syria and Iraq.

The court was told Causevic applied for a passport on March 2 and after he called to check on its progress he became aggressive, saying the federal police and ASIO were "dogs" and "little shits".

Mr Doyle told the court if the men were unable to get passports, they planned to carry out the attack in Melbourne.

The plot, which allegedly involved beheading a police officer and going on a shooting rampage with their weapon, was planned for Anzac day to have maximum impact, he said.

He said both men had weapons and a pledge of allegiance to the leader of IS on their phones.

Mr O'Connell argued his client should get bail because he had the support of his family, who were refugees from the Bosnian conflict.

He also said two Islamic community leaders and one mental health professional would counsel, guide and mentor Causevic if he was released.

Pair motivated by extreme ideology: AFP

Australian Federal Police officer Dennis Scott told the court Causevic came to the attention of authorities after Numan Haider was shot dead by police last September, after stabbing two counter-terror officers.

He also said Causevic and Besim, were long-time friends and he was motivated by extreme ideology.

Mr Scott said Causevic, who had been working as a concreter until he was recently laid off, was seen waving a shahada flag at a police officer on a motorbike.

The flag has been used by IS.

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The court was told Causevic had been under police surveillance in the lead up to the raids and was seen driving near the Shrine of Remembrance about two weeks before Anzac Day.

It also heard Besim and a 14-year-old-boy in the UK also charged with terrorism-related offences over the alleged plot were getting increasingly worried about Causevic's behaviour attracting authorities.

Mr Scott read to the court examples of a discussion between Besim and the 14-year-old, in which Besim allegedly indicated he had access to a machete.

The boy allegedly responded "sharpen that as hard as you can, then run police over and decapitate".

Besim allegedly replied "that sounds like a plan", Mr Scott told the court.

But Mr O'Connell said there was no evidence Causevic had been privy to these discussions.

"There's no evidence that's been communicated to him in anyway," he said.

Mr Scott said police believed both accused teenagers were involved in the plot.

"The applicant does indicate he's 'on-board' with the intentions between the co-accused and himself," he said.

Police also alleged Causevic was in a car crash 10 days before Anzac Day and told the other driver involved that "Australia is shit and IS is going to kill this country".

Leaders offer to mentor Causevic if bail granted

Sheik Moustapha Sarakibi from the Islamic Council of Victoria said he had visited Causevic in solitary confinement in prison and the teenager was in shock.

Sheik Sarakibi said Causevic did not seem to understand the seriousness of his predicament and was confused about Islam.

He said he would mentor him and offer support if he was released on bail.

Council president Ghaith Krayem also told the court he was prepared to have daily contact with Causevic if he were released, and would organise mental health professionals to work out what was "driving their thinking".

He said he was deeply concerned "about a ripple effect coming into play" following the five arrests.

Last week 19-year-old Mehran Azami, of Narre Warren, was charged with importing weapons, including dozens of tactical knives and Tasers disguised as mobile phones, in relation to the alleged plot.

Causevic's father was seen crying in the public gallery during the hearing.

A decision is expected to be handed down on Friday.

ABC/AAP