The men, aged between 21 and 31, were charged on Saturday with preparing to enter a foreign country "for the purpose of engaging in hostile activities," an offense that carries a maximum penalty of life imprisonment.
Australian Attorney-General George Brandis told reporters on Sunday "their intentions to travel to the Middle East to engage in terrorist war fighting were known to the authorities," and that their passports had earlier been canceled.
The five, who were not named, were arrested on Tuesday after towing the seven-meter motor boat almost 3,000 km (1,865 miles) from Melbourne to Cairns in northern Queensland state, police said.
The men, in custody since Tuesday, will appear in court on Monday.
Brandis said that when it became clear to the men they could not leave "in an orthodox way, they remained under surveillance so that if they attempted to leave the country in this very unusual way they would be able to be stopped and they were."
There is "an unusual character to the plot, I know it has been ridiculed, but these are serious crimes," he said.
NO CURRENT THREAT
A separate police statement said there is no current threat of a terrorist act to the Australian community arising from this investigation.
Australia, a staunch U.S. ally, has been on heightened alert for attacks by home-grown radicals since 2014 and authorities say they have thwarted a number of potential ones. There have been several "lone wolf" assaults, including a cafe siege in Sydney that left two hostages and the gunman dead.
About 100 people have left Australia for Syria to fight alongside organizations such as Islamic State, Australia's Immigration Minister said last month.
Police said earlier this week that it was unclear where the men had planned to put the boat in the water. Indonesia and Australia share a maritime border, but it spans several hundred kilometers of open sea at its narrowest point.
The Australian Broadcasting Corporation said Melbourne-born radical preacher Musa Cerantonio, a vocal supporter of Islamic State who was deported from the Philippines to Australia in 2014, was among those charged. Police declined to comment on the report.
On Sunday, Australian Foreign Minister Julie Bishop said she will attend Syria peace talks in Vienna on Tuesday co-chaired by US Secretary of State John Kerry and Russian Foreign Minister Sergey Lavrov.
(This story has been refiled to add a missing word in first paragraph, and delete the extraneous word in last paragraph)