The 16-year-old was taken into custody along with Mild Atai, 20, both from Western Sydney over allegations they were 'raising money' for ISIS.

On Wednesday the schoolgirl will appear in Parramatta Children's Court to apply for bail, the ABC reported.

It is alleged she had been enlisted by Atai to transfer $5000 to an Australian ISIS fighter, with whom Atai has been in contact with.

She was going to be given the money in cash, and send it via Western Union, and the teenager was not known to police until recent months.

Her friendship with Atai came to light after the shooting of police officer Curtis Cheng outside Parramatta Police Station.

The pair were arrested in Guilford on the street they both live on, after an alleged meeting to discuss the money transfer in a nearby park. They are not believed to be related or in a relationship.

Atai remains in police custody and will also apply for bail on Wednesday.

He and the schoolgirl's chargers carry a maximum penalty of 25 years.

Atai was a target of the original counter-terrorism raids conducted under Operation Appleby in September 2014.

He was named among a group of 18 suspected extremists in a control order last year.

Meantime the contact in Syria - is also well-known to police and has been trying to recruit Australians through social media and climb the ranks of the ISIS.

After Atai and the 16-year-old were arrested on Tuesday morning Deputy NSW police commissioner Catherine Burn said the girl was not someone 'well known to police'.

However, investigators will allege the schoolgirl was involved in 'extremely serious matters'. Police will allege the pair used 'mechanisms' to raise the funds but were not specific.

'It is disturbing we are continuing to see a trend of teenaged children involved in these activities,' Ms Burn told reporters.

Police said the arrests do not relate to a specific terrorist threat.

14 people have now charged under Operation Appleby since September 2014, Daily Mail reported.

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