The older man was found by passers-by in the street and was pronounced dead when emergency services arrived a short time later.
The younger man was charged with murder on Sunday morning, and is due to face the Innisfail Magistrates Court on Monday.
Detective Acting Inspector Gary Hunter said police would allege the men were known to each other, but the nature of the relationship was still under investigation.
"Police also believe there was an arrangement between the two people for the amputation of the leg," Detective Hunter said.
"During my 34 years as a police officer, I've never experienced a situation as we are presented with here."
Detective Hunter could not speculate on whether drugs were involved, or provide any detail about the exact nature of the arrangement.
Police have urged anyone with information to come forward, particularly if they have dashcam or CCTV footage.