A Kiwi living in Australia says he was mistaken for a Muslim and threatened with decapitation because he had a beard.

Queensland police are investigating the incident after expatriate Lucas Pollard, 19, was abused at a Gold Coast intersection.

Mr Pollard, originally from Tokoroa, said a Holden Commodore driver pulled up beside him at traffic lights in Ashmore last Thursday.

Seeing Mr Pollard's beard, car occupants started calling him "a dirty Muslim", he said.

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"I went to pick my brother up from karate and at a set of lights a carload of Aussies were yelling at me, calling me a Muslim, and said if I was walking they would have ran me over and cut my head off," Mr Pollard told APNZ.

Mr Pollard explained he was a New Zealander and also not a Muslim.

They allegedly replied: "That's all right, after these Muslims you c***s are next."

Mr Pollard said he experienced the occasional "go back to New Zealand" comment but nothing as abusive as the decapitation threat.

A Queensland Police spokesman yesterday confirmed police were investigating the incident.

Mr Pollard earlier told the Gold Coast Bulletin he was concerned such an incident would happen again, to him or somebody else.

Queensland has the largest New Zealand-born population of any Australian state.

Tensions are high in parts of Australia, with police carrying out unprecedented anti-terrorism raids in Brisbane, Sydney and Melbourne over the past fortnight.

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A young Muslim man was also shot dead by police last week.

The raids followed claims of Australian links to the so-called Islamic State fighting in Iraq and Syria, and to a domestic plot in which a would-be terrorist allegedly planned to decapitate a randomly-selected civilian.