One of the teens is known to them amid reports his father has been convicted of terror related offences.
The 16-year-old boy, pictured on the right in 2014, spoke to Fairfax Media after his family home was raided.
"We will be alleging that the two 16-year-old boys went to a gun shop in Bankstown and purchased two knives", she said.
"It's there for a reason because that means that there are people, no matter what age unfortunately, who want to do an attack and who can do an attack and they are out there".
The pair were refused bail on Thursday and are due to appear before Parramatta Children's Court in Sydney later the same day.
"We don't have any specific information of a particular target where we will allege that there was going to be an imminent attack", said New South Wales Deputy Police Commissioner Catherine Burn.
Police questioning one of the boys.
"I don't know if they had knives, that's what they're claiming, but we're trying to confirm", the boy said.
Two 16-year-old Australian boys arrested in Sydney after each bought a knife were charged on Thursday with planning a terrorist attack on behalf of the extremist Islamic State group, police said.
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"We believe the attack was inspired by Islamic State", Burn added.
A teen is detained in Bankstown after police swooped to prevent an alleged terror attack.
In a freakish twist, soon after the arrests radical Muslim preacher Junaid Thorne appeared in the street and demanded police tell him, "Where are my brothers?"
The boys reportedly told police at the time they "only stand for God".
"Potentially someone today would be without their life", he said.
The 16-year-old former East Hills Boys High School student, who can not be identified, spoke to Fairfax Media weeks after his family's home was raided in the initial Operation Appleby raids in September 2014.
The family lost a defamation case against the police but are still pursuing a civil case for wrongful arrest.
Mr Phelan said the arrests once again highlighted the disturbing and rapid radicalisation of young Australians. "They've gone from zero to full radicalisation within 48 hours or 72 hours to an event that we've had to stop".
According to government officials, six attacks have been foiled over the past year in the country and some 44 suspected terrorists have been charged since September 2014. "I can't see that changing in the near future".