James Michael Waugh, 28, was arrested in April after a tip off to the National Security Hotline alerted authorities to a number of online posts allegedly made by Mr Waugh.

In one post, Mr Waugh allegedly threatened to kill members of the Canberra House of Prayer and posted his own address inviting members to confront him.

"I'm going to kill every single one of you dog polytheist c----," a post he allegedly wrote read.

Mr Waugh has pleaded not guilty to possessing an object to be used to kill, threatening with the intent to cause public alarm and using a carriage service to menace or harass.

The court heard Mr Waugh had ordered a scimitar from Pakistan and had sharpened it before making threats to behead Christians in his front yard.

"I have issued threats, along with my name and address, to every coward dog church in Canberra. If you know someone with balls send them along. I've bought a scimitar and intend to cut their heads off in my front yard as reprisal," he allegedly wrote in an online message to friends.

Mr Waugh had previously applied for bail twice and had the applications rejected by two magistrates for fear he would commit further offences.

His lawyer Helen Hayunga made the application on Wednesday stating there was new information before the court that needed to be considered.

She said his time in custody had allowed Mr Waugh's mental health to be further assessed, as when he was arrested he was deemed to not have any mental health condition.

Ms Hayunga said he had since been diagnosed with a delusional disorder and appropriate accommodation had been found for Mr Waugh with two family friends in Curtin.

Prosecutor Vivian Wei strongly opposed the bail application saying Mr Waugh was "completely preoccupied by extreme religious views" and posed a danger to the community.

She said the most recent mental health report before the court pointed to Mr Waugh having a minimal response to his current treatment and that while he was under supervision in prison he posed a low risk to others.

However, she said the report stated that there was a likely increase in that risk if he was released into the community.

Ms Wei said Mr Waugh's extreme religious beliefs had been "ongoing and fixated" for a period of two years and had caused the breakdown of a long-term relationship, him to become homeless and to lose his job as a journalist.

She said the purchase of the scimitar showed his actions were highly premeditated and that he had previously suggested he does not believe in the Australian government or our laws and hates police.

In response Ms Hayunga said, "it's one thing to have views considered eccentric or bizarre, it's another thing to act on them."

Magistrate James Lawton determined Mr Waugh's risk of committing further offences could be mitigated through strict bail conditions.

He released him on bail but ordered he must reside with the two family friends, must accept supervision, he must not approach the Canberra House of Prayer and he cannot use social media.

Mr Waugh's matter will return to court in February next year.