The Australian government has announced a gun buyback scheme in the wake of the Bondi Beach attack - its deadliest mass shooting in decades.

The scheme is the largest since the Port Arthur massacre in 1996, which left 35 people dead and prompted Australia to introduce world-leading gun control measures.

Fifteen people were killed and dozens injured on Sunday when two gunmen, believed to have been motivated by "Islamic State ideology", opened fire on a Jewish festival at the country's most iconic beach.

On Friday, police also said there was no ongoing reason to detain a group of men who were arrested in Sydney over their "extremist Islamic ideology".

Police allege Sunday's attack, which they have declared a terrorist incident, was committed by a father-son duo. Naveed Akram, 24, has been charged with 59 offences, including 15 counts of murder and one of committing a terrorist act. His father Sajid was killed during the attack.

The day after the shooting, the national cabinet - which includes representatives from the federal government and leaders from all states and territories - agreed to tighten gun controls.

Speaking to the media on Friday, Prime Minister Anthony Albanese said there are now more than 4 million firearms in Australia - more than at the time of the Port Arthur massacre.

"We know that one of these terrorists held a firearm licence and had six guns, in spite of living in the middle of Sydney's suburbs... There's no reason why someone in that situation needed that many guns.

"If you're going to reduce the number of guns, then a buyback scheme has to be a piece of that puzzle," Australian Federal Police Commissioner Krissy Barrett added.

The new scheme will purchase surplus, newly banned and illegal firearms, and will be funded on a 50-50 basis with the states and territories. Hundreds of thousands of firearms will be collected and destroyed, the government estimates.

National cabinet has also agreed to impose limits on the number of firearms held by any one individual, restrict open-ended firearms licensing and the types of guns that are legal and make Australian citizenship a condition of holding a firearm licence.

Work on a national firearms register will be accelerated and firearm regulators will have better access to criminal intelligence.

On Friday, New South Wales Police said they were preparing to release seven men with extremist ideology, but that they would continue to be monitored.

Tactical officers swarmed on the group, who had travelled from Victoria and were known to police there, in dramatic scenes in the suburb of Liverpool on Thursday. Officers found a knife, but no guns or other weapons.

NSW Police Commissioner Mal Lanyon told a press conference there is "no confirmed link" between the alleged terrorists and the detained group, but that Bondi Beach was one of several locations the latter was intending to visit.

"Whilst this specific threat posed by the males is unknown, I can say that the potential [for] a violent offence being committed was such that we were not prepared to tolerate the risk," Commissioner Lanyon said.