It comes as the political parties gear up for the most expensive and complex federal election in Australia's history.

The threat of espionage and foreign interference has overtaken terrorism as the country's principal security concern, according to domestic spy agency Australian Security Intelligence Organisation.

Director-general Mike Burgess outlined in his annual threat assessment on Wednesday evening the scale and sophistication of foreign intelligence services, and their operations, was requiring more attention and resources than ever.

Traditional foes weren't the only cause for concern. Countries regarded as "friends" of Australia also had "sharp elbows and voracious intelligence requirements", the intelligence head said.

One operation had already attempted to undermine the election system, but had since been thwarted. Mr Burgess said it served as a warning to remain on guard.

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Described as a "foreign interference start-up", a wealthy puppeteer hired a local well-connected operative to do their covert bidding in identifying susceptible election candidates to benefit their foreign government.

If the operatives, and their candidates, were successful, the plot could have given a foreign country avenues to influence politicians, shape decision-making and help identify other political figures who could be recruited.

"The puppeteer and the employee plotted ways of advancing the candidates' political prospects through generous support, placing favourable stories in foreign language news platforms and providing other forms of assistance," he said.

"The aim was not just to get the candidates into positions of power, but also to generate a sense of appreciation, obligation and indebtedness that could subsequently be exploited."

But the political candidate used for the foreign intelligence operation would be none the wiser, Mr Burgess said.

While expected to hand over information about their party's positions on key areas, including defence, foreign investment and trade, and engage in lobbying colleagues on contentious issues, the parliamentarian would not be clued in that the information was being sent to a foreign power, he said.

Mr Burgess had earlier warned politicians on all levels make "attractive targets" for foreign adversaries.

In response to the potential threat, Mr Burgess said ASIO would provide federal politicians with information on how to deal with it.

He committed to writing a letter that would outline the risks and provide high-level advice on what to look for.

"Almost every sector of Australian society is a potential target of foreign interference," Mr Burgess said in 2020.

"The level of foreign interference is high at all levels of government - it's actually higher at local than state and federal."

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