An Australian man has been charged with allegedly helping Islamic State develop missiles, police said.

Haisem Zahab, a 42-year-old electrician, was picked up during a raid at his home in the town of Young, in rural New South Wales.

He is accused of researching and designing systems to assist the extremist group's efforts to develop their own long-range guided missiles, Police Commissioner Andrew Colvin told reporters in Canberra.

Zahab is also accused of researching and designing a laser warning device that could alert IS, also known as ISIL, to incoming guided weapons used by coalition forces in Syria and Iraq.

Mr Colvin said: "We believe he has networks and contacts in ISIL - not necessarily just in the conflict zones, but in other parts of the world as well and he has been relying on them to pass this information."

He called Zahab's alleged research "fairly sophisticated".

The raid, at the end of an 18-month investigation, involved dozens of police, including a dog squad and officers with metal detectors. The property is about 270km southwest of Sydney.

Australian prime minister Malcolm Turnbull said: "This highlights that terrorism, support for terrorist groups, and Islamist extremism is not limited to our major cities."

The suspect, who appeared in court briefly on Tuesday, faces charges of supporting extremist groups overseas, which are punishable by life imprisonment.

He was refused bail and will reappear on 8 March.

Since Australia's terrorist threat level was elevated in September 2014, the government says there have been 12 extremist plots foiled by police.