But prosecutors have also withdrawn a charge against Mr Azari of conspiring to commit a terrorist act, leading his barrister to seek his immediate release on bail.

Mr Azari was arrested at his home at Guildford in Sydney's west last September during the largest counterterrorism operation in Australia's history.

Police alleged that the young man was involved in planning a terrorist act in a phone call with Mohammad Ali Baryalei, Australia's most senior member of the terrorist group Islamic State.

"What you guys need to do is just pick any random unbeliever. When finished put the flag of the state in the background and film it and send it off," Mr Baryalei allegedly said during the phone call.

Mr Azari allegedly replied, "Yeah".

Police have also charged Mr Azari with knowingly making funds available to commit a terrorist act.

On Wednesday, Central Local Court heard that a fresh charge of conspiracy to murder had a been laid against Mr Azari on Monday. The details of this charge are not yet known.

Prosecutors withdrew a charge of conspiracy to commit a terrorist act, and added a further new charge of "doing acts in preparation to commit a terrorist act".

Mr Azari's barrister, Steven Boland, said that he would be opposing the ongoing detention of his client in Goulburn's Supermax prison.

"They're trying to withdraw a charge that my client's been detained on in Supermax for six months," Mr Boland said.

He has previously told the court that the recorded phone call in no way demonstrates that his client ever agreed to commit or be part of a terrorist act.

He has also asserted that Mr Azari could not receive a fair trial because of Prime Minister Tony Abbott's "unprecedented interference" in the case.

At the time of Mr Azari's arrest, Mr Abbott said intelligence indicated "certain people" in Australia were allegedly planning a public beheading to be carried out in the name of Islamic State.

Sections of the media took this up as applying to Mr Azari, an assumption that the man's defence says is no way borne out by the facts.

The hearing at Central Local Court continues.