Police are keeping tabs on a dozen men and boys in the community who they fear could launch a terrorist attack in Australia.
The warning came as Prime Minister Malcolm Turnbull reported to cabinet and parliament on his security talks with world leaders at a series of summits over the past week.
The ABC's Four Corners program, to be aired on Monday night, reports that out of a known group of 19 terrorism suspects seven are in jail but 12 are being closely watched in the community.
"I think there can be no doubt that there's a small group in Sydney that are engaged in activity which wants to upset the Australian way of life," Australian Federal Police counter-terrorism chief Neil Gaughan said.
Some are subject to control orders because police believe there is an "unacceptable, high risk they will commit a terrorist attack".
Spy agency ASIO says it is investigating about 170 people in Australia who are supporting extremist groups in Syria and Iraq.
Mr Turnbull met with the national security committee of cabinet in Canberra to discuss further ways to deal with violent extremism.
He said tackling the financing of terrorism and the use of social media for propaganda, as well as helping build greater social cohesion, would be high on the government's agenda.
"The terrorists want us to bend to their will, to be frightened, to change the way we go about our lives to abandon our values," Mr Turnbull told parliament.
"If we do that, they win and they will not win, we will not let them win."
Since May 2014 the government has introduced five tranches of law updates - including one regarding control orders last week - to strengthen the powers of security agencies and give police more flexibility in enforcing the law.
The government also wants laws to allow dual-nationals suspected of terrorism offences to be stripped of their citizenship passed by the end of next week.
Justice Minister Michael Keenan told reporters after the national security committee meeting the government was keen to stay well ahead of the threat from Islamic State.
"At this stage we believe we've got the settings right," he said.
"If we learn other lessons, particularly in relation to our operational activity or if there's other gaps identified, then we would seek to deal with that as soon as possible."
However, the "fundamentals" in Australia had not changed, having set the terrorism alert level to high - meaning an attack was "likely" - in September 2014.
A Newspoll found 76 per cent of voters believe it is likely, very likely or inevitable that a large-scale terrorist attack will be carried out in Australia.
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