Jibryl Alamouie handed himself in to police in December last year, shortly after police raided his home in Condell Park as part of counter-terrorism investigation Operation Appleby.

Police say they found the disassembled pieces of a number of guns, including a sawn-off double-barrelled shotgun, a .303 bolt-action rifle, as well as a significant quantity of live ammunition.

They also allegedly found a number of books on combat and military history, including the Encyclopedia of Combat Tactics.

Mr Alamouie was charged with multiple firearms and ammunition possession offences.

On Wednesday, Mr Alamouie's barrister Greg James, QC, told the NSW Supreme Court that a flag in his client's possession was "a flag commonly found in the Muslim community" and had nothing to do with the extremist group ISIS.

He said that the guns discovered had been in "small pieces" and one of them, the .303 rifle, dated back to the Boer War and "had been used, most significantly, in Gallipoli".

The books, such as The Seven Military Classics Of Ancient China, spoke of an "interest in military history", he said.

He also said that his client had a "serious psychological condition" that was exacerbated by hs presence in custody, and that the young man's family had offered a $100,000 surety if bail was granted and to keep him under "virtual house arrest".

But Justice Richard Button found that Mr Alamouie's psychological condition, in combination with the amount of weapons and ammunition he had allegedly possessed, was a matter that "gives rise to serious concerns".

"This young man ... is said to exhibit features 'often associated with an active psychotic episode' and that he experiences 'unusual perceptual events'," Justice Button said.

"Bearing those expert opinions in mind and the materials that were found, and the amount of ammunition, there are serious concerns of the applicant committing an act of violence."

He refused Mr Alamouie's bail application.