The 24-year-old, who went by the online identity "ozshock," was seized at a town 76 kilometres north of Sydney on Tuesday.
"The man is a self-proclaimed leader of the group Lulz Security (Lulzsec), a computer hacking group that has existed since 2011," the Australian Federal Police said.
"It will be alleged that this person, known by the online identity ozshock, had gained unauthorised access and caused data impairment to a government website during this month."
LulzSec, an offshoot of the larger group Anonymous, has claimed responsibility for multiple cyber attacks, including against Sony Pictures, the CIA and other government organisations.
The man was employed as an IT professional "in a position of trust within the company," with access to sensitive information from clients including government agencies, police said.
It added that "the man's knowledge and skills presented a significant risk to the clients of the company for which he was employed had he continued his illegal online activities."
He has been charged with two counts of unauthorised modification of data to cause impairment and one count of unauthorised access to a restricted computer system. He faces a maximum of 12 years in jail.
Voice of Russia, AFP