The boy was arrested on Tuesday afternoon at his family home in The Oaks, a semi-rural suburb about 25 kilometres west of Campbelltown.

He was denied bail on Thursday despite his lawyer, Aaron Tang, telling Parramatta Children's Court that his parents would lock up all the knives in their home and effectively keep the boy under house arrest.

The boy, who is of Greek background and has significant developmental disabilities, has no affiliation with religious extremism but allegedly sought to carry out the attack for ideological reasons.

The Crown prosecutor, who refused to give her name, told the court the boy had been planning the attack for between two weeks and two months.

He had allegedly drawn up a map on his computer marking out various "attack sites" around Sydney.

In one Facebook post, he said he had access to a knife. In another Facebook post written in the wake of the Orlando massacre, he said that the victims were people "that deserved it, every each one of them ... thank you and God bless for the shooting" followed by a love heart emoticon.

The court heard he posted messages "with the purpose of carrying out mass killings with a knife" including one that caused police to believe an attack was imminent.

Alcohol was involved when he wrote some of the posts and the boy deleted hard drives to cover evidence, the prosecutor told the court.

Mr Tang argued that any alleged threats were made in the context of "raising mental health and suicide prevention including threats of self harm".

He said there was "a real question mark" over whether it should have been classified as a terrorism matter.

"Is a child Rain Man a terrorist?" he said.

He said the boy had Asperger's syndrome, depression, anxiety, mild intellectual disabilities, is socially isolated and left school recently due to bullying.

However, the court heard he stopped seeing specialists or taking his medication about six months ago due to the medical side effects.

"There was a level of unsophistication in the [offence]," Mr Tang said.

The prosecutor said there was a risk to the community and that the boy continued with his behaviour after being contacted once by the police.

"Upon being found out he was not deterred," she said.

Magistrate Jeffrey Hogg said Mr Tang had provided little evidence of the boy's current mental health state and therefore he wasn't satisfied that there were exceptional circumstances to warrant bail.

The boy kept his face in his hands for much of the three-hour bail hearing and became teary when he was denied bail. His mother left the court in tears.

On Wednesday, his father told reporters that the boy had done the act "as a prank".