The brother of Australian cricket star Usman Khawaja is free on bail after fronting a Sydney court yesterday following his arrest for his allegedly devising a fake terror plot.

Arsalan Khawaja is facing serious charges of forgery and attempting to pervert justice which relate to an alleged scheme to frame a love rival of a mutual work colleague at the University of New South Wales.

The 39-year-old was arrested on Tuesday and stands accused of framing Mohamed Kamer Nilar Nizamdeen of devising a terror plot that outlined alleged plans for a series of attacks targeting former Australian prime minister Malcolm Turnbull, former Foreign Minister Julie Bishop, and several major landmarks, including the Sydney Opera House.

The alleged scheme led to Nizamdeen's arrest and a four-week stint in Goulburn maximum security prison. The 26-year-old is now suing police.

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Authorities arrested Nizamdeen, who was a PhD student and casual IT worker at the university, after a handwritten book was found on campus in August, outlining the alleged terrors plans.

Nizamdeen was charged with planning a terrorist attack before investigators sensationally cleared him of any wrongdoing and dropped all charges in October.

Counter-terrorism police questioned Khawaja in October and later searched his Western Sydney home, before his eventual arrest yesterday.

Sydney's Daily Telegraph report the supposed love affair between a 21-year-old woman and Nizamdeen, Khawaja's co-workers, was all in his mind, with the woman telling police there was nothing between her and Nizamdeen.

The bizarre events unfolded as Usman Khawaja was in Adelaide preparing to take on India with the Australian side ahead of the start of the first test on Friday.

The veteran of 34 tests and 18 one-day internationals addressed media following a nets session, moments after he was reportedly informed of his brother's arrest by a Cricket Australia staff member.

"I won't be saying much, guys. It is a matter for police to deal with," said Khawaja.

"Out of respect for the process it'd be inappropriate for me to make any further comment.

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

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Police will allege his older brother wrote the terror hit-list in a notebook and approached university security guards claiming that he had found it among Nizamdeen's possessions.

University security then contacted police who passed the notebook on to the NSW Joint Counter Terrorism Team.

Detectives who interviewed Nizamdeen reportedly grew suspicious after Nizamdeen refused to comment on the alleged extremist material.

It was not until he was imprisoned that he began to protest his innocence, suggesting he had been framed by Khawaja.

An expert's initial analysis of the handwriting was inconclusive before a follow-up examination suggested there could have been two authors.

Khawaja was granted bail with strict conditions after his father paid a $50,000 surety following his appearance at Parramatta Local Court yesterday. He did not comment as left Parramatta police station.

Khawaja has been banned from contacting any witnesses or employees of the university's IT department and is not allowed within 100m of the campus.

Meanwhile, the Daily Telegraph report Nizamdeen, who was released on bail in September, said: "The only evidence was the notebook, which was supposedly found by a colleague and was not in my possession at the time of discovery.

He added the notebook was "discovered in an office space on a different floor where I had not been working in for nearly a month".

Nizamdeen has since returned to his native Sri Lanka and accused the Australian Federal Police of conducting an investigation that was "immature, unprofessional, irresponsible, embarrassing and biased".

The Daily Telegraph report police said they would pay Nizamdeen's legal fees.

"We feel very sorry for him and what has happened to him … (but) we had to act early at the time, given the threats contained in that notebook," said Assistant Commissioner Mick Willing.

"We regret the circumstances which led to him being charged and the time he subsequently spent in custody."