A South Coast man who had neo-Nazi interests has been charged with a terrorism offence after allegedly planning to attack an electrical substation.

On Saturday, Joshua Lucas, 21, from Sanctuary Point, was arrested and charged with one count of preparing or planning a terrorist act. The offence carries a maximum penalty of life in jail.

Police will allege Mr Lucas attempted and planned to buy or acquire military equipment, including firearms and items capable of making improvised explosive devices.

Australian Federal Police Assistant Commissioner Scott Lee outlined the allegations against Mr Lucas at a press conference. He said while Mr Lucas had not made any moves to "finalise an attack plan", his behaviour in the past week had led police to act. "We felt we needed to move when we did to ensure that no attack occurred," he said.